CLO pipeline busy; new issue spreads likely to stay ‘sticky’; exposure to oil and gas low

By Cristal Cody

Tupelo, Miss., Jan. 16 – The CLO market ended the week with the first new issuance of the year and a steady pipeline ahead for the remainder of the month, according to market sources on Friday.

CVC Credit Partners, LLC priced the $509.25 million Apidos CLO XX/Apidos CLO XX LLC deal on Thursday via Credit Suisse Securities (USA) LLC, a source said.

Although pricing activity has been slow to start in 2015, the year’s first deal came in line with when the first CLO offering priced in 2014 on Jan. 16, Wells Fargo Securities, LLC analysts said in a note on Friday.

Looking ahead, PineBridge Investments LLC and Apollo Credit Management (CLO) LLC are in the deal pipeline, sources said.

“With a number of deals from late 2014 spilling over into this year and managers starting to ramp new deals, the pipeline remains full in the near term,” BofA Merrill Lynch analysts said in a note. “New issue spreads are likely to remain sticky in the near-term amid a heavy new issue calendar and potentially volatile broader markets as we expect oil prices to continue to decline before stabilizing.”

Oil and gas, which posted an average price loss of 7.1% in December, only has a 4.9% weighted average exposure among U.S. CLO 2.0 portfolios, the note said.

“Despite the broad market volatility induced by weakness and uncertainty in the energy sector, U.S. CLOs generally held up during the last month of December delivering positive returns,” the analysts said.

U.S. CLOs returned 1.9% in 2014, according to BofA Merrill Lynch.

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