European CLO Monthly: Loan Issuance soars, 2.0 CLO Tranche Defaults Emerge, Spreads Tighten

Research evidence excerpt

European CLO Monthly: Loan Issuance soars, 2.0 CLO Tranche Defaults Emerge, Spreads Tighten

European CLO Monthly

This is a revised version of a report originally published on July 1. It includes changes/updates to 14d rolling spreads and a few deal-specific details.

Primary market: The European primary market saw robust activity in June, with 15 new-issue deals pricing for a total of €6.3 billion. This represents

a nearly 10% increase from May and positions June as the second-highest issuance month of the year, just behind February. Year-to-date new

issuance now stands at approximately €31 billion, roughly on par with last year's figures. This month also marked the debut of a manager in the

European market, as Golub Capital, one of the largest MM CLO managers in the US, priced a middle-market deal. Since the beginning of June,

spreads have largely tightened across the stack, with the exception of BBB tranches. AAA spreads, for instance, tightened to 126 bps. In other IG

tranches, AA spreads narrowed by 6 bps and A spreads by 15 bps, with A spreads reaching their year-to-date tights. In contrast, BBB spreads saw a

10 bps widening, largely driven by wide prints from managers such as ICG (410 bps) and Invesco (350 bps). Further down the stack in Non-IG, BB

spreads tightened by 43 bps and B spreads by 52 bps. Looking ahead, our broader outlook holds steady, and we anticipate potential further

deterioration in technical factors as we approach summer, due to high supply and static demand. Beyond new issuance, 12 resets (€5.2 billion) and 3

refinancings (€1.1 billion) were also executed. This brought the year-to-date total for resets and refinancings to €28 billion, marking a strong 36%

increase compared to this time last year.