KBRA has released new research examining the evolution of European middle market collateralised loan obligations and their potential role in financing and managing private credit portfolios across Europe.
The report focuses on how the market is developing as securitisation gains traction among managers and investors as a tool for private credit assets.
The European middle market CLO sector remains at an early stage, with only a limited number of publicly rated transactions completed to date across the region.
Recent issuance activity suggests that managers and investors are increasingly exploring securitisation as both a funding mechanism and a portfolio management tool for private credit assets.
Unlike traditional broadly syndicated loan CLOs, European middle market CLOs are typically backed by less liquid, privately originated loans with different cash flow characteristics and more limited secondary market liquidity.
These structural differences create both opportunities and challenges for securitisation transactions, according to the research findings.
Recent transactions have demonstrated a relatively rapid evolution in market structure, including the emergence of replenishment features and multicurrency frameworks within deals.
Discussions are also underway around potential hybrid CLO structures that would combine private credit and syndicated loan collateral within a single vehicle.
At the same time, the market continues to face important constraints, including operational complexity, limited standardisation, and a still-developing institutional investor base.
KBRA is one of the major credit rating agencies and is registered in the United States, the European Union, and the United Kingdom.
The agency is recognised as a Qualified Rating Agency in Taiwan and is also a Designated Rating Organisation for structured finance ratings in Canada.
As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes across multiple jurisdictions, giving the firm a broad international footprint.