Carlyle buys €2.1bn in CLOs

The Carlyle Group picked up four management contracts from Highland Capital Management in its first European CLO deal.

The Carlyle Group has acquired four management contracts on €2.1 billion in European collateralised loan obligations from Highland Capital Management, bringing its CLO assets under management to $16 billion. Terms of the transaction were not disclosed.

CLOs are structured business loan agreements where interest payments vary across several tranches, depending on the level of risk obtained by the owner.

The acquisition, Carlyle’s first in Europe’s CLO market, is invested primarily in non-investment grade bank loans issued by European companies. The firm manages 32 structured vehicles, having added $10.5 billion of CLO assets in the last 18 months, having acquired funds from Stanfield, Mizuho, Foothill and Churchill as well as the closing of a $507 million CLO in 2007, according to a statement.

The purchase demonstrates the firm’s commitment to the European leveraged loan market, Carlyle managing director Colin Atkins said in a statement. The firm’s CLO business is a part of its global market strategies platform, which includes mezzanine loans, high yield and structured credit, distressed equity, debt, long and short term credit as well as emerging market equities and macroeconomic strategies.

Highland selling their European CLO management contracts does not necessarily mean that they are leaving the European credit business, or that they have stopped reviewing credit opportunities in Europe, according to a market source. 

Carlyle and Highland could not be reached for comment at press time.

On 29 February, Fitch Ratings announced that European CLOs assessed by the ratings agency had performed to expectations, and had seen fewer defaults than forecast, according to a statement. Fitch attributed the CLO’s performance to favorable interest rate environments, but noted that the assets underlying many of the structured agreements had deteriorated.