CLO Issuance Expected to Bounce in 2011

Several “good news” items in the corporate loan market would seem to indicate a big rebound for the issuance of Collateralized Loan Obligations in 2011.

In addition to the general recovery of the banks originating leveraged loans, other factors including rising yields for high yield corporate bonds (some would say an indirect consequence of the Fed’s QE2 initiative), tightening of spreads (driven by increased demand) and lower volatility are contributing nicely to some heady predictions for new CLO volume in the new year.

Wells Fargo is projecting issuance levels to race past the $4.3B  raised in 2010 to $12B-$15B in 2011 and, perhaps doubling that output in 2012.  If these projections are correct, that would suggest a return to a more “normal” 2003/2004-esque  market over the next 24 months when 66 transactions for more than $26B were completed in the U.S in 2004.

No matter which metrics you subscribe to, the horizon looks very good for this asset class.

About markferraris
Managing Principal Orchard Street Partners LLC

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