BNP Paribas closes second CLO fund

The French bank has raised E187m for Leveraged Finance Europe Capital II, a collateralised loan obligation fund that will invest in senior and mezzanine debt used in European LBOs.

French bank BNP Paribas has 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.


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


BNP Paribas’s first CLO product, LFE Capital I, raised E330m in 2001 and is fully invested.


LFE Capital II comprises five tranches, of which the four most senior classes have been assigned separate credit ratings from both Moody's and S&P. In a statement, BNP said that LFE Capital II would allow institutional investors “to gain exposure to non-investment grade credits in Europe with long term leverage on their investment.”


Despite being smaller than its predecessor, Jean Bergeret, head of leveraged finance at BNP Paribas, said there had been strong demand for the product from institutional investors which led to an 18 per cent increase in the offering: “The size of the transaction has been increased to E187.2m from an initial E158.5m as a result of strong demand shown by institutional investors during the marketing period.”


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.


Duchess II is the largest CDO to have closed in Europe this year. Duchess I, DSCDM’s first CDO closed at E750m in June 2001 and was increased to E1bn in February 2002 through a tap issue.


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