EMEA CLO House: BNP Paribas
Showing the way The euro CLO primary market stormed back in 2024, setting a new issuance record. It was also a year of rare innovation. For spearheading key advances while maintaining market share in a growing field, BNP Paribas is IFR’s inaugural EMEA CLO House of the Year.
BNP Paribas arranged 17 European new issue CLOs totalling about €5.9bn in 2024, up from 10 deals totalling €3.7bn the previous year, reflecting the boom in issuance, according to LSEG data. Adding in resets and refinancings takes the tally to 26.
The French bank was able to keep up with the surge of activity thanks to its strong distribution capabilities, ability to deploy its balance sheet and cohesive international team. As well as supporting existing clients, it was able to attract four new managers onto its roster.
“BNP Paribas is very strong on the syndicate side,” said one CLO manager, who also praised the bank’s global reach. “They’re well connected with their US colleagues.”
But BNPP went above and beyond in 2024, not just getting the basics right but also pushing the market forward in ways that caught the attention of peers and clients alike.
Most notably, BNPP was the sole arranger of Barings Euro Middle Market CLO 2024-1, a €380m offering that has opened the door to what is effectively a new asset class in Europe.
While CLOs backed by middle-market loans exist in the US, they have never taken off in Europe. In 2013, Hayfin Capital Management issued Hayfin Ruby II, a peculiar multicurrency CLO backed by a pool that was 50% directly originated by the sponsor, but the concept did not catch on.
The Barings deal led by BNPP is 90% backed by direct lending, in line with middle-market CLOs in the US, and sparked the imagination of CLO professionals, who said it could kickstart the asset class.
"That's not an easy thing to do," said the CLO manager.
"It's great," said a second manager. "I love to see innovation in the European CLO market because there is very little. I think it should count for a lot."
Pricing landed almost 50bp wider than euro CLOs backed by static portfolios of broadly syndicated loans and about 15bp back of replenishing BSL CLOs.
“People recognising it as a first is representative of the fact that the portfolio isn’t predominantly BSL in any way, shape or form,” said Dushy Puvan, head of CLO origination and structuring at BNPP. “It wasn’t something that was put together in three months; it’s something we worked on for two years.”
"Given this was a static, new type of CLO, we were very pleased with execution," said Joe Evanchick, head of the middle-market CLO platform at Barings.
The deal attracted a mix of European and US investors.
“We found significant demand for the product,” Puvan said. “Everybody is calling us to say: ‘we want to do it'.”
In the background, BNPP had been working on novel products that have a lower profile but potentially a big impact.
In the first quarter, it rolled out a new CLO warehouse vehicle, something like a master trust, that enables managers to open warehouses within a short space of time and ramp up their CLO programmes without having to negotiate afresh with arrangers, agents, trustees and law firms.
“This year has been about capturing new issue,” Puvan said. “The existence of this master warehouse programme means that if there’s an opportunity and the managers want to go, they can go. The quickest we can open a warehouse is two days.”
This innovation was driven by the buoyant CLO market but also by the specific conditions prevailing in Europe, where the supply of leveraged loan collateral can be a case of feast and famine, compared with the more free-flowing US market.
But it was also made possible by BNPP's financial heft and dedication to the CLO market. “Not everybody can commit this amount of balance sheet to do it,” said Puvan.
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