TY - JOUR T1 - Vallauris II—A CLO of LBOs JF - The Journal of Structured Finance SP - 85 LP - 89 DO - 10.3905/jsf.2006.661450 VL - 12 IS - 3 AU - Laurent Tournaud Y1 - 2006/10/31 UR - https://pm-research.com/content/12/3/85.abstract N2 - At the beginning of July 2006, Paris-based Natexis Banques Populaires launched its second CLO of LBOs, Vallauris II. This article describes some of the detail of the Vallauris II deal, and discusses how the European CLO of LBOs market looks set to develop. Vallauris II has issued four classes of rated notes and one class of unrated notes, to be used to purchase a portfolio consisting of at least 92% senior secured leveraged loans, and a maximum 8% second lien loans and secured mezzanine loans. The increasing risk profile and high level of demand for leveraged collateral have caused second lien and mezzanine loans to become increasingly expensive and structurally aggressive. Market pressure has reduced their availability to 8% of the total CLO loan portfolio from the more typical figure of around 15%. CLO funds are the most popular vehicles for selling leveraged loans to the secondary market, with over a quarter of leveraged loans in Europe sold on through such structures. And while CLOs have traditionally been dominated by banks, hedge funds are now being attracted by the increased private-equity buyout activity. As a result of increasing available funding, pressure on spreads is intensifying.TOPICS: CLOs, CDOs, and other structured credit, developed, other real assets ER -