European CLO Sales to Slow on ‘Skin in Game’ Guidance, Citi Says

Issuance of European collateralized loan obligations is likely to slow temporarily as managers adjust to a recent report by regulators, according to analysts at Citigroup Inc.

The research argues that guidance issued on Monday differs from previous interpretations of European Union rules set up to ensure CLO issuers have ‘skin in the game’ — a substantial financial stake in their vehicles. Citi’s report follows a note by Morgan Stanley analysts warning of “headwinds” for issuance from the regulators’ report.