Japan’s largest bank will this month expand its presence in Europe’s CLO market by becoming an arranger for the first time.
Mitsubishi UFJ Financial Group Inc is arranging its debut European CLO having already been an active buyer of CLO paper in the region. The move forms part of MUFG’s strategy to expand its securitised products business globally, a spokeswoman for the bank said.
The lender already arranges US CLOs potentially giving it existing relationships to leverage off – and can open up new pockets of investors in Asia to managers. But breaking into Europe may prove a challenge.
Since the financial crisis the number of banks arranging European deals has stayed fairly static at about 12, despite an increase in the issuer base and new supply topping €20bn ($22bn) in 2019, data compiled by Bloomberg show. There may also be barriers to entry from some established managers in the region, who say they don’t need any more arrangers.
MUFG’s mandate to arrange the third European CLO for NIBC Bank NV continues its push into securitised products, which is led by Tricia Hazelwood. The CLO business is headed by Asif Khan while in Europe the team is managed by Krishna Shah, who joined the bank in March 2016. This year the lender also hired Keith Allman from Loomis Sayles & Co to help expand its ABS business.
Mizuho Financial Group Inc, meanwhile, has also aired plans to line up CLOs in the region. The lender brought in Stefan Stefanov as a director for CLOs earlier this year as part of its markets reorganisation.
A spokeswoman for Mizuho declined to comment on the bank’s CLO plans.
The ambitions of these banks come at a time of increased scrutiny by Japanese regulators, who are surveying the nation’s financial firms to determine their exposure to foreign assets including risky credit products. The rapid expansion of Europe’s issuer base in the past three years, to 51 managers from 33 at the end of 2015, might increase the need for a greater number of arrangers to accommodate the additional issuance.
Some of the US managers expanding their CLO platforms into Europe could be open to working with a less established arranger in the region, based on a strong relationship in the US market.
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