Sona packs middle-market loans into a €400m European CLO

Sona Asset Management is preparing a €400m European CLO. The vehicle mixes broadly syndicated loans with middle-market private credit, according to a preliminary KBRA rating announcement reported by Alternative Credit Investor.

The deal, Sona Aclai CLO I DAC, carries a multicurrency label, which suggests it is not limited to euro-denominated paper. KBRA expects the closing portfolio to hold 69.6% senior secured broadly syndicated loans. Middle-market loans would make up the remaining 30.4%. The portfolio would span 97 corporate obligors. A five-year reinvestment period gives Sona room to rotate collateral as loans repay. Sona, a UK manager founded in 2016, runs $19.7bn (£14.4bn) across CLOs, private credit strategies and managed accounts. The amount is small next to that total, but it brings the hybrid-loan strategy to the rated market.

The launch lands in a busy stretch for European CLO activity. Fortress Investment Group priced its third European CLO last week. Bridgepoint and CIC Private Debt both reset European-focused vehicles this week, according to the same report. Private Credit Daily's coverage this week tracked four managers pricing US CLO resets. The combined value was just under $2bn. Carlyle's new European liquid credit head expects an influx of new managers to compress returns further. Refinancing demand looks solid even as managers go after different collateral.

The hybrid structure changes the risk profile. Sona can source private credit exposure through its CLO platform rather than a dedicated fund, but the CLO's performance is now tied to the middle-market credit cycle. The preliminary rating leaves room for the portfolio mix to change before closing. If the hybrid format works, middle-market loans could become a standard part of European CLO collateral.