CLO Market Continues to Surge

Between the increasing number of new CLO programs coming to market in the first two months of 2012 and the projected US$70 Billion in reinvestment capacity scheduled to build through the year, CLO managers and arrangers have much to be smiling about.  Demand seems to be back!

Over the past several days, a variety of reports covering the Collateralized Loan Obligation  industry have begun to compare statistics for new issuance activity which rivals some of the best months of the pre-credit crisis years.  In February 2012 alone, S&P projects that more than US$2.5 Billion in new programs will have priced before the end of the month.  Combined issuance levels for the first two months of 2012 are nearly 300% above what we saw for the same period in 2011.  As issuance levels in March of 2011 were virtually zero, the expectations for the 1st Quarter 2012 are simply a blowout over the previous year’s activity.

Many are projecting the 1st Quarter 2012 to exceed the strong US$4.4 Billion in issuance that we saw in the 4th quarter of 2011, which was itself a strong performance over the US$2.1 Billion issued in the 3rd Quarter of 2011.

On the side of capacity for new loans among the existing CLO programs, JP Morgan projects some US$60 Billion in pre-payments and US$8 Billion in principal proceeds which will provide existing CLO Managers with some US$70 Billion in “buying capacity” and JPM beleives that managers will favor new loans over the secondary market to replenish their programs.

All in all, some great news for both the corporate loan market and the rapidly improving CLO marketplace.

About markferraris
Managing Principal Orchard Street Partners LLC

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