CLO Refinancing Plans Put On Ice in Europe as Funding Costs Rise

As the war in the Middle East drives up the cost of CLO funding, some European managers are shelving their refinancing plans — a move that may complicate efforts by the region’s riskiest borrowers to roll over their debt.

Issuers including Alcentra, Five Arrows, Onex Credit Partners, and Napier Park Global Capital have all withdrawn refinancing plans in recent weeks as a plunge in leveraged loan prices makes cleaning up portfolios more expensive, while wider market spreads drive up the price of CLO liabilities. Only four refinancing and reset deals launched in March, down from 21 the previous month and an average of 16 over the past three quarters. Meanwhile managers continue to churn out new issue CLOs, which are currently more cost-effective.