Banks, Managers Cut Fees in Dysfunctional Europe CLO Market
- European arrangers share fees in order to boost equity return
- Issuance hampered if practice stops, but may help arbitrage
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All is not well in Europe’s CLO market. Strong supply of nearly 10 billion euros ($11.2 billion) masks a market that is requiring arrangers and managers to work for less in order to price deals.
To entice investors into the equity tranche of the CLO structure, some arranging banks are working for a fraction of what they are used to, while on the manager side, the traditional 50 basis point management fee has been reduced by more than 10 basis points in some recent cases.