Golub resets middle-market CLO; reissue volume light; mezzanine notes firm in secondary

By Cristal Cody

Tupelo, Miss., March 4 – CLO market action waned last week with market participants out at an industry conference, but the market has a strong pipeline of transactions in the works, according to sources on Monday.

GC Investment Management LLC priced a $399.5 million reissue and reset of a vintage 2017 middle-market CLO.

Broadly syndicated primary and secondary market activity moderated with three new issues and $420 million of BWIC volume in the secondary market, according to a BofA Merrill Lynch analysts’ note released on Monday.

“Primary levels, especially at the senior part of the stack, remain consistent with what we’ve been seeing over the past of couple of weeks,” the analysts said.

AAA-rated spreads have priced on average in the Libor plus 130 basis points area year to date.

New issue CLO supply is “running just marginally behind last year” at $17.1 billion versus $19.5 billion in the same period last year, according to the note.

The primary market is on pace to see $110 billion of volume this year, Wells Fargo Securities LLC senior analyst Dave Preston and associate analyst Mackenzie Miller said in a report on Monday.

“Primary issuance was nonexistent in the first few weeks of the year, given wider spreads and market uncertainty,” the analysts said. “The new-issue market reopened in February; $13 billion priced among 26 deals.”

Only about $2 billion of CLOs have been refinanced year to date, according to the report.

“The pace of refis/resets has slowed since December as spreads widened,” the Wells Fargo analysts said.

In the secondary market, AAA-rated spreads ended Friday flat on the week at an average Libor plus 127 bps area, according to the BofA Merrill Lynch report. CLO BBB-rated tranches firmed 5 bps to an average Libor plus 360 bps area, while BB-rated spreads tightened 10 bps on the week to the Libor plus 680 bps area.

Golub reprices 2017 CLO

GC Investment Management priced a $399.5 million reissue and reset of the Golub Capital Partners CLO 34(M) Ltd./Golub Capital Partners CLO 34(M) LLC middle-market transaction, according to a market source and a notice of optional redemption by refinancing and proposed supplemental indenture.

The CLO sold $195 million of class A-R floating-rate notes at Libor plus 170 bps, $50 million of class A-R loans at Libor plus 170 bps and $16 million of 4.26% class A-R-F fixed-rate notes at the top of the capital structure.

Natixis Securities America LLC arranged the offering.

The maturity date was extended to March 14, 2031 from the original March 8, 2029 maturity.

In the original offering issued March 8, 2017, the CLO priced $226.1 million of class A-1 floating-rate notes at Libor plus 185 bps; $36.8 million of class A-2 floating-rate notes at Libor plus 250 bps; $41.1 million of class B floating-rate notes at Libor plus 350 bps; $18.6 million of class C floating-rate notes at Libor plus 450 bps and $88.78 million of subordinated notes.

The CLO is collateralized primarily by middle-market senior secured term loans.

GC Investment Management is an affiliate of New York-based middle market lender Golub Capital.

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