European CLO recovery hampered by Volcker uncertainty

• Published in: Total Securitization
• Main Author: Caiger-Smith, Will
• Format: Trade Publication Article
• Language: English
• Published: New York Euromoney Institutional Investor PLC 03.02.2014
• Subjects: Banks; Collateralized loan obligations; Executives; Industrywide conditions; International trade; Investors; Loans; Regulation; Regulation of financial institutions; Risk retention; Securitization; Western Europe
• ISSN: 1938-7504

The European market for collateralised loan obligations could see EUR 8bn-EUR 12bn of new supply in 2014, according to experts at an industry conference in London on Tuesday. But while the buyer base is broadening and demand is increasing, regulation - in particular the Volcker Rule in the US - is continuing to put a dampener on market sentiment. Two European CLO deals have been priced so far this year, and panellists at IMN's European CLO conference in London said that with six active deals being worked on at the moment and four more expected to come, about 12 transactions should be priced in the first six months of 2014. With around EUR 15bn of CLO 1.0 deals set to amortise, plenty of cash will be available for reinvestment, said Charles Hand, a director in CLO trading at Bank of America Merrill Lynch. And as reporting season comes to an end, the new issue pipeline for new loans and bonds may start to fill up. But regulation is still a huge issue for the CLO market, and everyone's eyes are on the US, where negotiations around the Volcker Rule's treatment of banks' CLO holdings are seeding uncertainty, even as new investors take an interest in the market.