CLO Sales Set to Pass 7 Billion Euros as Investors Take on RiskJulie Miecamp and Patricia Kuo
Sales of collateralized loan obligations are approaching 7 billion euros ($9.6 billion) in Europe this year as investors seek higher-yielding assets.
Issuance of the debt, which pools high-yield securities and slices them into notes of varying risk and return, is up from 2.4 billion euros in the period last year, according to data compiled by Bloomberg.
Investors are buying riskier securities after almost six years of suppressed benchmark interest rates eroded yields. Top rated portions of CLOs are paying about 138 basis points more than benchmark rates, up from 132 basis points in 2013, Bloomberg data show.
“European CLOs continue to benefit from steadily growing demand from traditional asset-backed security and corporate debt investors looking for higher-yielding alternatives,” said Rishad Ahluwalia, the London-based head of global CLO research at JPMorgan Chase & Co. “We expect European issuance this year to reach as much as 15 billion euros.”
June is the busiest month for CLO issuance this year with 2.5 billion euros of deals completed, including the 352 million-euro Ares European CLO VII from Los Angeles-based Ares Management LP, and the 413 million-euro Phoenix Park CLO sold by GSO Capital Partners LP, the debt investment unit of Blackstone Group LP, Bloomberg data shows.
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