KKR and Sculptor bring seasoned European CLOs back to market

Two seasoned European CLOs are back in the reset market. One is KKR's Avoca CLO XXI, from 2021. It priced as a €397.6m transaction through Citi. The other, Sculptor European CLO VI, dates from 2019 and was arranged by JPMorgan. Creditflux reported both on August 13.

A reset keeps the loan portfolio intact. Rather than form a new CLO or wind one down, the manager rewrites the structure's terms against the same collateral, extending the vehicle's earning life without going through the primary market. That only makes sense if the underlying loans still carry enough spread to justify the transaction costs.

Seasoning matters. The 2021 book has likely used up most of its reinvestment window. The 2019 deal has survived the rate shock. Both still have enough life that the managers preferred to re-cut the structure rather than move the capital.

Neither deal replaces European new issuance. The reset route stays open for seasoned collateral, and for lenders a revised term sheet on a known book carries fewer unknowns than a primary deal.