IFC commits $80m to Asian CLO

The first fully Asia-Pacific backed CLO has secured an investment from IFC for its mezzanine tranches.  

The International Financial Corporation (IFC), the investment arm of World Bank, is planning to commit up to $80 million in United Asia Loan Funding Pte., a collateralized loan obligation (CLO) in Asia.

According to an IFC filing, the CLO is expected to raise $400 million and IFC will invest in the multiple classes in the mezzanine tranches. It will securitise primarily Asia emerging markets loans to borrowers domiciled in, or doing business in, the Asia-Pacific region that were originated by both global and regional banks in Asia. 

“The success of this pioneering CLO transaction would be instrumental in the revival of the Asian securitization market, which has been dormant since the global financial crisis. The project will encourage similar transactions by other asset managers and increase the supply and liquidity of fixed-income securities in the Asian market,” IFC said in a statement.

This is the first fully Asia Pacific backed CLO. It was launched and will be jointly managed by Singapore-headquartered UBO Asset Management Limited (UOBAM) and Hong Kong-headquartered SC Lowy Asset Management (SCL).

Standard Chartered, Resource Capital Markets and UOB Securities are the joint underwriters of the CLO.

According to a source close to the matter, the CLO is comprised by different tranches of loans from Asia Pacific issuers while there is a mix of global investors. The two managers of the fund are expected to invest a certain amount in the equity traches in order to show their strong alignment of interests.

The source also reflects that the CLO is taking longer to market than the ones in US and in Europe as the concept is less common in Asia but is confident that it would have raised sufficient amount of capital by the latter part of July.

According to a local press report, CLOs have been largely non-existent in the region apart from some activity in Australia in the mid-2000s. Those were mainly leveraged deals that were financed by CLOs.

“CLOs provide a critical funding mechanism for corporate borrowers in the US and Europe. With this transaction we hope Asia will follow suit and fill a vacuum for banks in need of liquidity for Asian par assets,” SC Lowy chief executive Michel Lowy said in a statement.

SC Lowy is an independent fixed-income specialist. It uses its balance sheet to operate a Primary Issuance and Secondary Trading business focused on high yield to distressed bonds, loans, trade claims and special situations.

UOBAM is a wholly-owned subsidiary of United Overseas Bank Limited. It has more than 30 years of experience investing in equities and fixed-income instruments across regional and global markets.

UOBAM is a wholly-owned subsidiary of United Overseas Bank Limited. It has more than 30 years of experience investing in equities and fixed-income instruments across regional and global markets.