US CLOs up more than 50% in 2013

7 January2014

Appleby Predicts Steady CLO Activity Through 2014

The total number of US-based collateralized loan obligation (CLO) deals in 2013 was up 56 percent when compared to 2012, according to Appleby, one of the world's largest providers of offshore legal, fiduciary and administration services. The 182 CLOs in aggregate issued in 2013 represented a total value of US$86bn, eclipsing the total issuance for 2012 by US$33.5bn. These are among the findings of Appleby’s second CLO Insider report, which provides data, insight and analysis on the CLO market, focusing on the second half of 2013.

“The CLO market in the second half of 2013 continued to expand as the low-interest-rate environment has pushed investors into securities that offer the possibility of higher returns,” said Julian Black, the Cayman-based Partner and Global Head of Structured Finance at Appleby. “Looking forward, we expect credit quality to remain strong in 2014 and that the US CLO market will remain similar to 2013.”

The average deal size rose by about 5% in 2013 when compared to 2012. When looking at the second half of the year, the report found the 86 CLOs closed were down from 96 in the first half of the year and average deal size stood at US$464m, or 3% less than the first half of the year.

“In total, there was US$39.9bn of issuance in the second six months of 2013,” said George Bashforth, Head of Directorship Services, Appleby Trust (Cayman) Ltd. “When added to the issuance for the first half of the year, the total puts 2013 64% ahead of the total issuance in 2012.”

According to the Appleby report, a core set of arrangers continue to dominate the CLO market, with Citigroup leading the ranking for the year, closing 31 deals valued at US$15.2bn. CLO managers are more diverse with CIFC Asset Management the most represented, closing seven new CLOs during 2013.

The data reveals that liabilities have gradually risen since the middle of 2013 with the average AAA spread for the second half of the year rounding out at about 138 base points. For the full year, the average was 131bp.

The report forecasts total deal value for 2014 to range from US$60bn to US$80bn, but notes that risk retention rules that may take effect in the first quarter of the year could impact the market. “In essence, we expect the pace of issuance in 2014 will hold up, subject to constraints caused by the scarcity of AAA investors and the effect of risk retention rules,” Mr Black said.

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Research methodology:

The Appleby CLO Insider report details Collateralised Loan Obligations (CLO) activity globally in the second 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 01/07/2013 - 31/12/2013 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.

 

 

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