Ares prepares to sell €300 million European CLO; market slows on holiday, bond sell-off

By Cristal Cody

Tupelo, Miss., July 5 - New issuance in the collateralized loan obligation market is slowing in July, but several deals, including a handful of European CLOs, are expected in the weeks ahead, according to market sources on Friday.

Ares Management LLC's €300 million Ares European CLO VI Ltd. transaction launched the last week of June, one informed source said.

"The target pricing is either late next week or early the week after," the source said.

Credit Suisse Group AG is the placement agent.

The deal will be Los Angeles-based Ares Management's first European CLO offering since 2007.

Several CLO managers also are "coming out relatively soon" with new European CLO issuance, a source said.

As previously reported, 3i Debt Management plans to bring a €300 million European CLO.

Pramerica Investment Management Ltd. also has a deal in the pipeline, according to market sources.

Some deals that were in the works after the market reopened earlier in the year were pushed back after the European Banking Association proposed a 5% risk retention requirement for CLO managers, sources said.

The new rule set to take effect on Jan. 1 requires that CLO mangers and not third-party sponsors hold the risk retention in the deal.

Managers have absorbed the proposal and are moving forward with the transactions, sources said.

"It's simplified in many respects because the manager needs to take the retention piece," a source said.

About €5 billion to €7 billion in new CLO issuance is forecast in Europe for the year. The U.S. CLO pipeline is projected to hit more than $70 billion in 2013.

U.S. activity

Activity in the U.S. CLO market slowed in the second quarter but is still quite active, sources said.

"It's not unusual for things to slow down in the summer months," a source noted. "There's a lot of deals still in the pipeline."

About $18 billion of new CLO transactions are reportedly in the pipeline.

Market activity slowed on Friday following the Independence Day holiday and the Labor Department's report that the June non-farm payroll report added 195,000 jobs, higher than the 165,000 forecast, sources said.

Treasuries sold off on the report on growing confidence the Federal Reserve will begin tapering its $85 billion-a-month asset purchases in September.

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