What is an APAC CLO?

There is something fascinatingly obscure about CLOs. Even once you unpack the acronym, you are still left with some important questions.

‘Collateralized Loan Obligation’ - Who’s obligation? Which loan? What collateral? ?

Of course, the typical APAC CLO is not at all mysterious. They are a practical innovation to address common DCM frictions.

Credit innovation

For the investor they deliver a diverse high yield investment universe. For the lender they permit cash recycling. For the borrower they provide diverse sources of capital.

APAC CLOs

Compared with the larger US and European CLO markets, the APAC CLO market is still nascent, however we do see substantial local innovation.

Whereas US CLOs are very large, often involve hundreds of corporate borrowers, growth of which is at least in part driven in part by banks’ ‘originate-to-distribute’ business model.

Our APAC loan securitization market is much smaller, although tremendously diverse and spans deals from sovereign wealth backed infrastructure to credit default swaps aimed at family offices.

CLOs as a tech challenge?

Managers soon discover that specialist DCM tech solutions are required to address common CLO deal frictions.

From interest forecasts and cash projections to complex waterfall, IRR, LTV modeling and make-whole calculations etc, fund and loan administrators deploy increasingly sophisticated platforms to deliver integrated reporting and monitoring solutions.

As Managers push the boundaries of financial innovation, APAC administrators will need to continually innovate new technologies to facilitate increasingly sophisticated credit strategies.