A slew of new euro CLO trades and refinancings are heading to market in the coming weeks, as fresh demand for sub-investment grade notes squeezes spreads across the capital stack.
The Loan Syndications and Trading Association (LSTA) on Thursday filed a notice of appeal on its CLO risk-retention case, two weeks after the US District Court of the District of Columbia ruled against the trade group.
Cairn Loan Investments priced its latest euro CLO last week, with some resistance in the senior levels signalling the primary market remains open but markedly less bullish.
Managers looking to capitalise on rapidly narrowing spreads are bringing CLO resets to Europe for the first time, but only a select few will be able to use this method to boost the economics of older trades.
According to a survey released this month, 75% of US CLO managers interviewed by law firm Maples and Calder say they have a risk-retention structure in place, an increase from 47% in February.
Banks predict CLO issuance of US$50bn to US$70bn next year, in line with 2016 volume, as the market adjusts to rules that force managers to be on the hook for a portion of their fund’s risk.