New York, July 11, 2013 – Collateralized Loan Obligation (CLO) deals increased by a dramatic 151% in the first half of 2013 when compared to the first six months of 2012, according to Appleby, one of the world's largest providers of offshore legal, fiduciary and administration services. This continues a three-year trend in the rapid increase of CLO issuances, with the number of deals growing by more than 300% between 2011 and 2012. The findings are detailed in Appleby’s inaugural CLO Insider Report, which provides data, insight and analysis on the global CLO market, focusing on the first half of 2013.
A total of 98 CLOs closed in the first half of 2013—a massive increase on the 39 deals closed in the same six months in 2012.
“With the value of the CLO market growing over 260% since 2011, it certainly seems that institutional investors are continuing to find value in CLOs,” said Julian Black, Appleby’s Global Head of Structured Finance. “With an estimated US$370bn in assets under management and growing, this market is blossoming as CLOs offer attractive risk-adjusted returns, as well as low default rates.”
In the first six months of the year, the top 10 deals by value increased by an average deal size of US$40m over the second half of 2012, and a significant US$175m over the same period in 2012. The report also found that with US$47bn of issuance, the first half of 2013 was the biggest half year ever in terms of value for CLOs and CDOs. The average deal size for CLOs closed during this time was US$482m.
A core set of arrangers are dominating the CLO market, with Citigroup leading the ranking for the first two quarters of 2013 with 20 deals, worth US$9.5bn, according to the report. They were followed by Bank of America Merrill Lynch (US$6.5bn), Morgan Stanley (US$6.1bn), Wells Fargo (US$4.0bn), and RBS (US$3.6bn).
A range of investors were involved at each of the different tranches of capital structure, including Japanese banks and US pension funds which are typically investing at the AAA level, where yields were around LIBOR plus 140 bps at the end of 2012. According to the Appleby report, spreads on AAA’s have since narrowed, dropping to near 115 in the second quarter of 2013.
“For the remainder of the year we expect to see the re-emergence of other asset classes,” said Mr. Black. “In particular, we are seeing Commercial Real Estate (CRE) CLO's re-emerging, and we expect to see this area as a growth sector going forward.”
“We are also seeing a trickle of deals emerging from Europe, but we will be monitoring this market with interest against the backdrop of Europe being a tougher market, and proposed regulatory changes within CRD IV which may stall the market. Both these factors could lead to an unsettled time,” said Mr. Black.
For further information on the CLO Market during the first two quarters of 2013, including a breakdown of top deals, top managers, and predictions for the remainder of the year, please refer to the full Appleby CLO Insider Report.
This report details Collateralised Loan Obligations (CLO) activity globally in the first half of 2013 using public information from a number of different sources including but not exclusively: leveragedloan.com, Creditflux, Standard & Poors, Moodys, Fitch and Securitization Intelligence. The date range is 01/01/2013 – 30/06/2013 inclusive. Deal status is as closed within the time period covered. Not all deals are reported immediately, so the figures are subject to change as new information becomes available.
Appleby is one of the world's largest providers of offshore legal, fiduciary and administration services. With an unparalleled presence in the key offshore jurisdictions of Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Isle of Man, Jersey, Mauritius and the Seychelles, the group offers advice on offshore law and provides fiduciary and administration services. We also have offices in four international financial centres of London, Hong Kong, Shanghai and Zurich.
Over 770 lawyers and professional specialists deliver sophisticated, specialised services, primarily in the areas of Corporate and Commercial; Litigation and Insolvency; Private Client and Trusts; and Property. We advise global public and private companies, financial institutions, and high net worth individuals, working with them and their advisers to achieve practical solutions, whether in a single location or across multiple jurisdictions.