December 19, 2012 / 6:55 PM / 7 years ago

BUYOUTS-CLOs top $50 bln as Carlyle Group floats its fourth

* More than 100 priced in 2012

* Third-largest year for issuance

* Wall of maturities looms by 2014

By Steve Bills

NEW YORK, Dec 19 (Reuters-BUYOUTS) - The collateralized loan obligation market has snapped back briskly, with a $620 million vehicle from The Carlyle Group capping a year when U.S. volume was on track to nearly quadruple to more than $50 billion in new CLO issuance.

Carlyle Group, the Washington, D.C.-based mega-firm, reported in December that it had successfully floated Carlyle Global Market Strategies CLO 2012-4, its fourth such vehicle in 2012 and its largest of the year. Carlyle Group said the new CLO, a transaction arranged by Wells Fargo, is earmarked for investments in corporate leveraged loans and high-yield bonds -good news for leveraged buyout shops that use such instruments to finance deals.

Carlyle Group had previously launched new-issue CLOs of $510 million in March and June, and a $615 million vehicle in September. The firm manages $17 million of structured credit and CLOs altogether through its Global Market Strategies unit, which has $30 billion of assets under management, comprising mezzanine and energy mezzanine loans; high yield and structured credit; distressed equity and debt; and four hedge fund strategies.

More than 100 CLOs have priced in the United States in 2012, and more than 60 of those since the beginning of August, sister division Thomson Reuters Loan Pricing Corp reported. Including CLOs in the pipeline, issuance stood above $50 billion toward year-end, compared with $12.7 billion of new-issue CLOs in 2011.

At the start of the year, market watchers had said that on the optimistic end they anticipated $25 billion to $30 billion of new-money CLOs to come to market in 2012. Indeed, according to money manager Highland Capital Management LP, itself a large CLO issuer with $29 billion in total assets under management in the category, 2012 was likely to turn out to be the third largest CLO year on record, behind only the peak years of 2006 and 2007, when primary issuance topped out at $95.6 billion and $104.7 billion.

By the end of December, total CLO issuance was expected to reach $55 billion, Highland Capital estimated early in December, and 2013 issuance could reach $65 billion. But the leveraged loan market will need continued health in this instrument. According to Mark Okada, co-founder and chief investment officer at Highland Capital, 90 percent of existing CLOs will come to the end of their reinvestment periods by the end of 2014, 80 percent of them by the end of 2013.

About 42 percent of CLO holdings comprise leveraged loans, according to Thomson Reuters LPC. In addition to new deals, a sizable share of older vintage CLOs are also expected to refinance in 2013.

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