Barclays Capital Asset Management closes second CDO fund

Barclays Capital Asset Management has announced that its second CDO fund, Jubilee CDO I S.A, closed in mid-December. The fund, a 13-year Netherlands-based LP, had an initial planned offering of EUR 500m, but due to investor demand was subsequently upsized to EUR 540.77m. Investors participating in the fund come from a broad geographical spread across Europe and Asia, the UK and Ireland. Jubilee follows on from the EUR 500m Blue Eagle CDO which was closed in December 2000. While Blue Eagle was predominately a European bond CDO, Jubilee will invest principally in European leveraged loans, with small carve-outs to invest in high-yield bonds and mezzanine debt securities. This change of direction reflects a trend in the CDO market. Although arbitrage CDOs really took off in Europe in 2001, with the European market becoming more like the well-established US market, the emphasis has moved away from bonds (which are seen as too risky due to the disappointing performance of the European high-yield bond market in 2001, especially after 11 September) to higher-quality leveraged loans. This leaning towards conservatism is also reflected in CDO fund sizes: some onlookers expected the size of funds to grow exponentially as the market expanded, however most CDO managers now maintain that a EUR 500m transaction limit should be maintained. Other recent leveraged loan CDO funds in Europe include BNP Paribas’ EUR 315m Leveraged Finance Europe Capital I and Duke Street Capital’s EUR 750m Duchess I. It is planned that Jubilee will be invested primarily in Western European countries, Scandinavia and the UK and Ireland, although it has a small carve out for US issuers.

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