Risk-retention rules aren't depressing issuance of European collateralized loan obligations as much as some participants expected.

So far in 2013, 10 European CLOs have priced, bringing total issuance for the year to €3.4 billion ($4.5 billion), according to a report by Standard & Poor's.

S&P expects to see at least another €1.4 billion of new European CLO issuance in the third quarter of 2013.

The momentum that started in the first quarter of 2013 continued throughout the second, even after a draft paper by the European Banking Authority called into question what had been a common interpretation of risk-retentions rules. Compliance is now expected to be much more costly.

But S&P expects this momentum to remain strong in the third quarter.

However, S&P noted that, even with this surge in issuance, CLOs still make up a relatively small portion of the European leveraged loan market and that many outstanding CLOs are now or very soon to be beyond their reinvestment period. So, CLOs still have some way to go before they can provide a very meaningful financing solution for the European corporate market.

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