In this episode of the podcast, Josie Shillito interviews Christine Ferris from JP Morgan about the rise of private credit CLOs in Europe. They discuss the increase in middle-market CLO issuance, the potential for private credit CLOs in Europe, and reflections on starting a career in finance. They also touch on the challenges of balancing work and motherhood.
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Quick takeaways
Ivy Hill XXI marked J.P. Morgan's entry into middle-market CLO arranging, indicating the expansion of the mid-market CLO industry.
Entering the private credit CLO market allows J.P. Morgan to diversify financing options, capture a larger market share, and provide better risk-return profiles for investors compared to broadly syndicated deals.
Deep dives
Introduction of Ivy Hill, the first middle market CLO from J.P. Morgan
Ivy Hill is the first private credit CLO issued by J.P. Morgan, representing a significant milestone for the company. They worked tirelessly to ensure the success of the deal, focusing on investor education and bringing new investors on board. The deal was upsized due to investor demand, with strong interest in the AAA tranches. The structure of the CLO and the investor mix were key factors in the success of Ivy Hill.
Reasons for entering the private credit CLO market
J.P. Morgan recognized the shift of capital from broadly syndicated loans to private credit and saw an opportunity in the private credit CLO market. They wanted to diversify their financing options and capture a larger market share. Private credit CLOs provide a better risk-return profile for CLO equity investors due to the higher excess spread compared to broadly syndicated deals. The increasing demand from private credit managers and investors also drove J.P. Morgan to enter this market.
Growth and potential of middle market CLO issuance in Europe
Middle market CLO issuance is expected to be a record-breaking year in the US, and there is also significant potential for growth in Europe. The expanding private credit market in Europe, coupled with the demand for financing and investor interest, makes it a favorable environment for middle market CLOs. The introduction of private credit CLOs in Europe could change the landscape of the private credit space and bring more visibility and opportunities for investors. While there may be obstacles such as ratings considerations and other financing options, the market is moving incrementally towards establishing a strong presence in Europe.
When JP Morgan priced Ivy Hill XXI in July it marked the bank's entry into middle-market CLO arranging and underlined the expansion of the mid-market CLO industry. That deal also re-sparked the inevitable question of whether now is the right time for private credit CLOs in Europe.
For this week’s episode of our podcast, Josie Shillito quizzes Christine Ferris, head of JP Morgan's global CLO primary business on this opportunity.
Is Europe ready? And what would it do to the private credit market as we see it now?
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