“European managers of collateralized loan obligations (CLOs) face a number of challenges in 2016, ranging from lackluster markets to new regulations, although the market continues to be significantly stronger in Europe than in the U.S.,” according to Magnus Wilson-Webb, Managing Director in BNY Mellon’s Corporate Trust strategy team. Magnus participated in the CLO Manager’s Roundtable on Wednesday, June 15 at the Global ABS 2016 conference in Barcelona.
“European CLO managers face growing competition for loan assets from other participants such as direct lenders and banks,” Magnus said. “The decline in active arrangers over the last year might be increasing the difficulty of launching new deals.
“The recent proposal by a member of the European Parliament to increase the risk retention requirement on CLOs from 5% to 20% is a big talking point here in Barcelona. Risk retention has been an important topic as market participants consider new ways to address the changing regulatory climate.
“The European CLO market has held steady through 2016, which has been good enough to outperform its U.S. counterpart, where volumes are down 50 percent from 2015 levels. Unlike the U.S. market, spreads on European CLOs have tightened through 2016 with AAA spreads on a recent European deal coming in at under 130 bps.
“Despite the challenges in the markets, deals are continuing to get done and European deals in particular continue to have better pricing than in the U.S.”
The Global ABS 2016 conference in Barcelona is a significant gathering of the securitization industry where investors, issuers, trustees, structures and analysts discuss the state of the securitization market and the financial sector as a whole.
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