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CLO Issuance Eases in January After Stellar 2017

US CLO issuance

The U.S. CLO market, which finished 2017 on a surprisingly strong note, downshifted in January, though issuance in the segment easily topped that seen in the year-ago period.

There were $6.34 billion of collateralized loan obligations vehicles last month, less than any month in 2017 – except the $980 million in January. Issuance for all of 2017 totaled $117.75 billion, according to LCD.

That number was surprising, with some market expectations at the start of 2017 at roughly half that amount, as the U.S. CLO market entered its first full year under the risk-retention requirement, courtesy Dodd-Frank. That rule mandated that CLO managers retain at least 5% of their CLO vehicles, as opposed to selling them off in their entirety.

As opposed to hindering the market, however, CLO issuance took off, including some $7 billion issued specifically with risk-retention in mind, according to industry estimates.

CLO issuance in 2018 is expected at broadly the same levels as in 2017, according to LCD’s Andrew Park.

CLOs are a crucial part of the leveraged loan investor base, as they comprise roughly 60% of deals brought to the U.S. syndications market, according to LCD. Right now, there is roughly $970 million outstanding in the U.S. leveraged loan market, according to the S&P/LSTA Index. – Tim Cross

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