Further Growth Expected for CDOs of Leveraged Loans

The market for CDOs of leveraged loans remains healthy and the next year should see further growth, according to a report by Standard & Poor’s. Mike Nicholson, credit analyst at Standard & Poor’s Structured Finance Ratings group in London, commented: ‘Standard & Poor’s rated 12 CLOs that closed in 2003, compared with seven in 2002 and six in 2001. Of the 12 transactions, six transactions were repeats, and three were first-time CLOs by managers with previous CDO experience.’ The report notes that LBO volume has increased for the fifth straight year. Leveraged loans are becoming riskier, with a greater proportion rated ‘B’. However, ratings and credit estimates on CDOs of leveraged loans have shown strong stability, being considerably less volatile than European corporates in general.

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