The pace of collateralized loan obligation (CLO) issuance is expected to remain strong in 2006, as long as leveraged loan issuance, liquidity, default rates, liability and underlying collateral spreads, and investor demand for CLO equity remain stable this year, according to market sources. The consensus is that issuance should be at least on par with or higher than 2005's CLO issuance levels.
According to preliminary data released by Moody's Investors Service, more than 90 U.S. CLOs were issued in 2005, totaling about $42 billion. This compares with 57 Moody's-rated CLOs issued in 2004, totaling about $22 billion. Standard & Poor's also reported a rise in CLO issuance, according to its 2005 data, which show 99 US S&P-rated CLOs issued in 2005 to total about $47 billion. This compares with 66 S&P-rated CLOs issued in 2004, totaling about $26 billion.