Trends And Developments In European CLOs And Leverage Loans

A good market

The demand for more CLOs in Europe is rising with both old and new investors looking to join in this part of the market. While there are some concerns about the loosening of deal documents given covenant lite tendencies, there is still foreign investor interest in European CLOs from Asian investors, especially from Japan. Borrowers can enjoy more flexibility, although lower recovery rates may hit lenders when the credit cycle turns.

Why Japanese investors are interested

Japanese buyers have been involved in the US CLO market in recent years but were not in the European market since the financial crisis. With rising costs of swapping dollars to yen and the better rates for yen to euros, investors see the European market as more appealing.