CQS preps €362.2 million CLO; $60 billion of deals eyed for 2014; comment period to end

By Cristal Cody

Tupelo, Miss., Oct. 29 - CQS Management, Ltd. plans to price a €362.2 million European collateralized loan obligation deal via Deutsche Bank AG, London Branch as expected later in the week, according to a market source on Tuesday.

The Grosvenor Place 2013-1 CLO will sell €202.13 million of class A-1 floating-rate notes (expected Aaa//AAA); €46.38 million of class A-2 floating-rate notes (expected Aa2//AA); €21 million of class B floating-rate notes (expected A2//A); €18.38 million of class C floating-rate notes (expected Baa2//BBB); €22.75 million of class D floating-rate notes (expected Ba2//BB); €11.38 million of class E floating-rate notes (expected B2//B-) and €40.18 million of subordinated notes in the equity tranche.

CQS, a global management asset firm based in London, will manage the CLO.

Strong 2014 primary forecast

The CLO market looks set to support about $15 billion in issuance per quarter with 2014 issuance projected at about $60 billion, according to Dave Preston, an analyst with Wells Fargo Securities, LLC.

The deal total does not include CLO refinancings.

U.S. CLO issuance now totals about $64 billion, the third-highest year on record, behind 2006 and 2007, Preston said in a note.

"With less than 10 months of issuance, 2013 U.S. CLO issuance is already 14% higher than 2012's primary volume," he said. "We believe that the risk-retention rules (as currently proposed) will push many managers to issue as many CLOs as possible prior to the deadline, even at less than optimal economics."

The comment period deadline is Wednesday to submit comments to the federal agencies on the proposed risk requirement rule changes announced on Aug. 28 for the Dodd-Frank Wall Street Reform and Consumer Protection Act.

CLO managers would be required to retain 5% of the CLO balance under the proposal.

The requirement would become effective two years after the final rule is published.

Primary activity in the CLO market is expected to stay ramped up ahead of the rule with about $15 billion of deals so far remaining in the pipeline for this year, according to informed sources.

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