GSO Capital raises $511 mn in Europe mid-market CLO fund: report

GSO Capital Partners, the credit investment arm of the Blackstone Group, has raised 450 million euros ($511 million) in a Europe mid-market collateralized loan obligation (CLO) fund, including 22 million-euro commitment from South Korea’s Police Mutual Aid Association (PMAA), according to a South Korean media report.

The fund consists of 45 million-euro equity and debts of different credit ratings from triple A to single B for the remainder, edaily reported on Nov 20.

“PMAA was the only equity investor this time,” a source told the South Korean news outlet. “The remaining equity portion will be taken over by GSO Capital Partners itself.”

PMAA, a $2 billion retirement fund for South Korean police officers, split the commitment to 17 million euros for equity and five million euros for single A-rated debt.

It was its first investment in European CLOs, adding to its $60 million investment in three US CLO funds.

“We decided to make the commitment to diversify our US-focused investment,” a source of PMAA was quoted as saying.

The European CLO fund is expected to deliver a net internal rate of return of around 9%, with a 12-year term.

Among other South Korean institutional investors, Military Mutual Aid Association (MMAA), Korea Scientists and Engineers Mutual-aid Association, DB Insurance Co. Ltd. and Shinhan Life Insurance Co. Ltd. have invested in GSO Capital Partners’ funds.

In particular, MMAA had committed 17.5 million euros to GSO Capital Partners since 2013, but did not participated in the latest fund.

"We will retrieve investment in GSO Capital Partners’ funds soon, an MMAA source told edaily, without elaborating further.

CLOs pool loans of different credit ratings and sell slices of them to investors.

Europe has 93.1 billion euros of CLO funds outstanding. The issuance of European CLOs is on track to set a new annual record, with more than 26 billion euros ($29.6 billion) printed so far in 2018, according to Reuters on Nov. 21.