February 2002
Heavyweights join the CDO party
Europe's high-yield debt market is on its knees. Investors have had
two years of heavy losses and new issuance has ground to a halt.
But bankers predict rapid growth in a related area: the issuance of
high-yield CDOs (collateralized debt obligations).
The supply of CDOs in Europe is booming. But the market is
dominated by investment-grade credit deals, with the majority in
synthetic rather than cash form (see page 72). Only 5% of European
CDOs relate to high-yield assets, compared with 80% in the US.
The high-yield sector has been the preserve of buy-out specialists
and private-equity houses such as Intermediate Capital Group and
Duke Street Capital, rather than traditional money managers.
But that could be about to change. Pimco, regarded by many as the
world's smartest fixed-income investment house, began a month-long
roadshow at the end of January to market its first European CDO.
The e400 million ($345 million) fund -...
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