AIB closes third CDO fund

The Irish bank has held a final close of its third collateralised debt obligation fund on E407m, increasing the total third party capital to invest in leveraged loans to E1.2bn.

AIB Acquisition Finance, a division of Allied Irish Bank Capital Markets, has held a final close of its latest Collateralised Debt Obligation, Galway Bay CDO, totalling E407m.

CLO or CDO funds are pool investment vehicles set up to buy debt assets. To finance its investments, the pooled vehicle issues bonds to investors.


The bank said it has attracted 70 investors for the Galway Bay CDO. Around 70 per cent of the Galway Bay CDO fund is likely to be invested in senior secured loans and the remainder in mezzanine debt. A small portion will also be invested in equity.


According to a press release, AIB Acquisition Finance has arranged over E8.5bn of senior and mezzanine debt over its 13 years in operation to date. This is AIB’s third CDO backed by leveraged loans and means the company has made over E1.2bn of third party money available to the European LBO market for acquisitions and special financing opportunities, in addition to investments made from AIB’s own balance sheet.


The Galway Bay CDO will invest in leveraged loans to a pool of middle to large sized private equity-backed European borrowers across a range of industries.


“AIB Acquisition Finance now has the capability to participate at very meaningful levels in both senior and mezzanine LBO debt,” said Robert Gallagher, head of corporate banking international at AIB Capital Markets. “AIB’s commitment to Galway Bay indicates the high level of confidence we have that the European LBO markets will continue to grow and be the source of attractive and disciplined lending business.”


Last month, French bank BNP Paribas sold E187.2m of notes for BNP Paribas' Leveraged Funds Group Leveraged Finance Europe Capital II (LFE Capital II), a collateralised loan obligation (CLO) fund that will invest in a managed portfolio of senior and mezzanine LBO debt across Europe. BNP Paribas’s first CLO product, LFE Capital I, raised E330m in 2001 and is fully invested.


In April, Duke Street Capital Debt Management (DSCDM), the debt fund management division of the European private equity group, held a final closing of Duchess II, the firm’s second CDO fund. The fund, which invests in both sterling- and euro-denominated senior secured debt and mezzanine mainly used in Western European leveraged buyouts, closed on E550m.


Intermediate Capital Group, the London-based mezzanine provider and specialist fund manager, is currently marketing its third CDO fund.