What's Happening In Europe?

2016 Market Review

The European CLO market had a very slow start to 2016 but rebounded strongly near the end of Q1 2016 and throughout Q2 2016. In June 2016, the Brexit vote initially appeared to put the brakes on the European CLO market as participants weighed up the consequences of the UK leaving the EU and the impact it would have on European CLO structures. However in July issuance levels recovered and remained strong through H2 2016, to such an extent that the full year volume amounted to €16.8 billion from 41 deals, surpassing the previous issuance record for CLO 2.0 transactions of €14.49 billion, which occurred in 2014.

One of the key contributing factors to this increased level of activity was the availability of AAA investors. The demand for AAA tranches of European CLOs was such that the downward pressure on AAA spreads was a consistent factor throughout 2016. These spreads began the year around 150bps but finished up in December 2016 as low as 95bps.