Issuance of European CLOs may be stalled, but 3i Debt Management believes that once the macro-economic picture improves, these structured finance vehicles will resume their role as important players in the region's loan market. That was part of the rationale for the London-based firm's recent acquisition of seven European CLOs from U.S. money manager Invesco.
It is not a view held by all. Unlike the U.S., where CLO volume stands at roughly $18 billion year to date, there have been no new deals in Europe since the financial crisis. Moreover, many European CLOs still in existence have come to, or will soon come to, the end of their reinvestment periods. And some observers fear that regulations meant to reign in the structured finance market (specifically the 'skin in the game' rule that requires CLO managers to retain 5% of the risk in a deal) will impede future issuance, at least for smaller managers.