Europe’s longest-standing CLO manager Intermediate Capital Group (ICG) is poised to complete fundraising for what it claims is the “largest CLO in the region since the crisis”.
The €400 million vehicle will be backed by Lloyds Banking Group, and is expected to close by the end of this month.
“The main reason why European CLOs have been slow to return to the market is the level of investor returns,” Dagmar Kent-Kershaw, head of ICG’s credit fund management unit, told Private Debt Investor. “But that has changed and returns are now at levels appealing to investors.”
Many forecast the demise of complex credit funds like CLOs following the recession, particularly as falling M&A volumes reduced the pool of leveraged loans in which to invest, and regulation grew increasingly stringent.
“CLO structures have operated as they should through the crisis, with in-built mechanisms to protect investors in a downturn. Economically, they can offer attractive returns now as the underlying loans offer compelling risk-adjusted credit spreads in today’s yield-hungry markets” adds Kershaw.
The effect of regulation (including the so-called 'Skin in the game' directive) will have a very significant effect on issuance going forward, Kent-Kershaw believes.
ICG's vehicle is the latest to launch this year. In February, Cairn Capital launched the first new European CLO since the financial crisis, having raised €300 million. It was followed by subsequent vehicles of a similar size from fund manager Pramerica and Apollo Global Management.