Over 70 participants, including numerous BNP Paribas clients from diverse sectors such as banking, securities, asset management, and insurance companies, convened in the bustling heart of central Tokyo. They aimed to harness the invaluable insights and perspectives offered by an esteemed panel of seasoned practitioners and experts in Collateralized Loan Obligations (CLOs).
BNP Paribas organized a dynamic series of interactive discussions featuring prominent CLO managers hailing from both the United States and Europe as panellists. The discussions spanned a variety of critical topics, including the latest updates on the US and European leveraged loan markets, emerging trends within the US CLO landscape, insightful perspectives from CLO equity investors, and the most recent advancements in the realm of private credit markets.
Some of the key takeaways include:
US leveraged and Loan markets updates | Perspectives from CLO equity investors
Conditions for new CLO formation, which underpins over two-thirds of the leveraged loan asset class across both primary and secondary markets, remain favourable. This strength can primarily be attributed to the enticing “CLO equity arbitrage.” Despite a noticeable uptick in downgrade and default activities, the technical dynamics within the performing loan market have been positively impacted by the continuous creation of CLOs.
US CLO markets outlook | Private credit markets update
BNP Paribas has observed a robust demand for CLOs on a global scale, with sustained interest particularly evident from clients in Japan. CLOs are recognized as a mature financial product with a proven history of resilience, demonstrating solid performance across various market cycles. Looking ahead, BNP Paribas anticipates that regardless of broader market fluctuations, demand for CLOs will persist, reinforcing their status as a popular investment choice. Projections for 2025 indicate that the high volumes of new issuance and resets anticipated throughout 2024 are likely to persist, with AAA-rated CLOs expected to experience further tightening due to increasing demand, as they continue to show strong performance while remaining competitively priced from a relative value perspective.
European leveraged Loan and CLO markets update
The European CLO market is witnessing encouraging growth, primarily driven by a rise in loan issuance. This positive trend has rendered the CLO arbitrage increasingly appealing to investors, thereby fostering the creation of new CLOs.
CLO managers are strategically positioned to adeptly navigate the intricacies of credit fundamentals alongside technical considerations, empowering them to identify lucrative opportunities and optimize their investment portfolios through proactive management strategies.
According to Adnan Zuberi, Global Head of CLOs and Co-Head of Global Capital Markets Americas at BNP Paribas: “We were delighted to present an impressive line-up of leading global CLO managers, who shared their views on the market landscape and the outlook for leveraged loans, structured credit, and issuance trends. This allowed investors to gain a deeper understanding of the complex dynamics shaping the global CLO sector.
“Japanese clients are a key part of our Global CLO franchise, and this conference reinforces our continued commitment to the region.”
Investors gained a deeper understanding of the complex dynamics shaping the global CLO market.
Adnan Zuberi, Global Head of CLOs, Co-Head of Global Capital Markets Americas, BNP Paribas
The CLO Forum received overwhelmingly positive feedback from investors eager to engage in the discussions. BNP Paribas aimed to deliver a unique and informative event that exemplified the collective expertise of its Research, Origination, Syndication, Structuring, and Sales teams, thereby providing top-tier content.
Recognized for its excellence, BNP Paribas was awarded the prestigious title of CLO Bank of the Year and won CLO Deal of the Year at the US Securitization Awards 2024 organized by GlobalCapital, as well as the esteemed CLO Deal of the Year by GlobalCapital’s European Securitization Awards 2024.
According to Susumu Ishikawa, Head of Credit Sales, Global Markets Japan at BNP Paribas: “The Bank’s significant presence and reputation across key locations around the globe enables us to effectively tap into a diverse and broad investor base, and successfully lead the syndication of CLO transactions.”
The Bank’s significant presence around the globe enables us to successfully lead the syndication of CLO transactions.
Susumu Ishikawa, Head of Credit Sales, Global Markets Japan, BNP Paribas
**Interview with Adnan Zuberi, Global Head of CLOs and Co-Head of Global Capital Markets Americas at BNP Paribas**
**Interviewer:** Thank you for joining us today, Adnan. Let’s talk about the recent closure of the BNP Paribas AM Collateralised Loan Obligation (CLO) fund at €407.5 million. What does this milestone represent for BNP Paribas and the CLO market as a whole?
**Adnan Zuberi:** Thank you for having me. The closure of our CLO fund is significant as it underscores robust demand for CLOs, particularly in a dynamic market environment. It highlights BNP Paribas’s strength in structuring and managing CLOs—providing our clients with attractive investment opportunities.
**Interviewer:** During the recent conference in Tokyo, over 70 participants gathered to discuss CLOs and leveraged loan markets. What were some key insights or trends that emerged from these discussions?
**Adnan Zuberi:** It was a fantastic gathering of expertise. A key takeaway was the favorable conditions for new CLO formations, bolstered by the CLO equity arbitrage. Despite some uptick in downgrades, the technical foundation of the loan market remains strong. Participants also noted the growing interest in CLOs from our Japanese clients, reiterating their belief in the resilience and performance of this asset class.
**Interviewer:** You mentioned the strength of the Japanese market. How do you see the CLO landscape evolving within that region?
**Adnan Zuberi:** Japan is indeed a crucial part of our global CLO strategy. The appetite for CLOs is growing there, and we anticipate sustained interest as these structures are viewed as mature products that deliver value across various market cycles. Our focus remains on fostering relationships and deepening our commitment to the region.
**Interviewer:** What do you foresee for the CLO market and private credit markets going into 2025?
**Adnan Zuberi:** Our projections indicate continued strong issuance and resets in the CLO market through 2024, with AAA-rated CLOs likely experiencing tightening due to elevated demand. As market conditions shift, we also expect private credit markets to retain their attractiveness, contributing further to the dynamics of the CLO space.
**Interviewer:** Lastly, what is your message to investors regarding the current and future state of the CLO market?
**Adnan Zuberi:** I would encourage investors to stay informed and engaged with the CLO market, as it continues to showcase resilience and adaptability. The complexities of the market present both challenges and opportunities, and our goal at BNP Paribas is to help navigate these intricacies for our clients.
**Interviewer:** Thank you for your insights, Adnan. It’s been a pleasure discussing the CLO landscape with you.
**Adnan Zuberi:** Thank you for the opportunity!
