August 18, 2022

Appleby’s Insider report reveals continued expansion of CLO market

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n666654744_2239473_6208278-300x300Appleby has published its second report on collateralised loan obligations (CLO). The law firm’s CLO Insider report, which provides data, insight and analysis on the CLO market, focused on the second half of 2013. It reveals that the total number of US-based CLO deals in 2013 was up 56 per cent when compared with 2012.

The 182 CLOs in aggregate issued in 2013 represented a total value of $86bn (£52.4bn), eclipsing the total issuance for 2012 by $33.5bn.

Julian Black, Cayman-based partner and global head of structured finance at Appleby, said: ‘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. 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 five per cent in 2013 when compared with 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 the average deal size stood at $464m, or three per cent less than the first half of the year.

George Bashforth, head of directorship services, Appleby Trust (Cayman) Ltd, said: ‘In total, there was $39.9bn of issuance in the second six months of 2013. When added to the issuance for the first half of the year, the total puts 2013 64 per cent ahead of the total issuance in 2012.’

According to the Appleby report, a core set of arrangers continues to dominate the CLO market, with Citigroup leading the ranking for the year, closing 31 deals valued at $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 131 base points.

The report forecasts total deal value for 2014 to range from $60bn to $80bn, but notes that risk retention rules that may take effect in the first quarter of the year could affect the market. Black concluded: ‘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.’

This content was originally sourced from the Appleby website.

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Related story:

Appleby advises China Wood on Hong Kong Stock Exchange listing

Appleby has acted as Cayman counsel for China Wood Optimization (Holding) in relation to its listing on the Growth Enterprise Market of the Hong Kong Stock Exchange by way of placing on 6 January 2014, with net proceeds of approximately HKD210m (£17m).

China Wood will use the majority of the net proceeds from the offering for the enhancement of production capacities through the acquisition of advanced equipment and the repayment of loans, as well as strengthening research and development capacities for new products. The remaining proceeds will be used for the expansion of sales networks, working capital and other general corporate purposes.

The Appleby team was led by Judy Lee, a corporate partner in Appleby’s Hong Kong office, assisted by senior associate Chris Cheng. PC Woo & Co advised the company as to Hong Kong law and Commerce & Finance Law Offices advised the company as to PRC law, while Chiu & Partners advised the underwriters as to Hong Kong law and Jingtian & Gongcheng advised the underwriters as to PRC law.

This material was originally sourced from the Appleby website.

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