New issuance of collateralised loan obligations ("CLOs") rose last year to its highest level since the credit crunch. 2013 saw U.S. CLO issuance rise to about US$81 billion, from US$54 billion the year before while European CLO issuance leapt to about €8 billion from zero during the same period.
Market participants expect this momentum to carry on into 2014. Headwinds including competition from the high-yield market and direct-lending funds, as well as on-going adjustment to regulatory hurdles, are expected to be balanced by a continuation of reasonable economics, with new issuance predicted to reach a similar level to the previous year.
Luxembourg, Ireland and the Netherlands are frequently chosen as jurisdictions for the establishment of the issuer when structuring European CLO transactions, with the final choice often being made on the basis of tax or regulatory treatment or the on-going administrative costs associated with a particular jurisdiction. We have collaborated with local counsel in each jurisdiction to prepare the attached quick reference guide to some of the key issues to consider when establishing an issuer.
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