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SC Lowy, UOBAM eye $400m Apac CLO

Fixed income specialist SC Lowy and UOB Asset Management are set to launch a $400m CLO that will consist predominantly of bank loans from Asia Pacific issuers.

By Rev Hui
01 Mar 2016

Joint underwriters Standard Chartered, Resource Capital Markets and UOB Securities are in the midst of a US roadshow this week, with meetings also scheduled in Europe and Asia the following week.

SC Lowy and UOBAM are looking to securitise about $400m worth of loans, which would make the product the first fully Asia Pacific backed CLO, according to a Tuesday press release from SC Lowy.

“CLOs provide a critical funding mechanism for corporate borrowers in the US and Europe. With this transaction we hope Asia will follow suit and fill a vacuum for banks in need of liquidity for Asian par assets,” SC Lowy CEO Michel Lowy said in the statement.

CLOs have been largely non-existent in the region apart from some activity in Australia in the mid-2000s. Those were mainly leveraged deals that were financed by CLOs.

According to a source close to the situation, the financial crisis stopped interest in securitization in the region, but there is no reason for Asia to not have a CLO market.

The source added that the potential of CLOs is big given that the size of the Asian loan market has also been getting bigger. And as banks in the region become more conscious about balance sheet management because of capital rules, conditions are ripe for CLOs to grow.

But in the initial stages, the CLO market in Asia is expected to to revolve around loans in G3 currencies. That is because loans in local currencies are extremely illiquid in the secondary market, reckons the source.

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