Deutsche, Apollo, MCF price CLOs before holiday; deal pipeline stands at $14 billion

By Cristal Cody

Tupelo, Miss., Dec. 20 - The deal pipeline remains full with about $14 billion of broadly syndicated and middle market CLOs expected to price early in the new year, according to market sources on Friday.

Over the week, Deutsche Asset & Wealth Management sold $441.81 million of notes due Jan. 18, 2026 in the Flagship VII Ltd./Flagship VII LLC CLO transaction, a source said.

The offering is the firm's first deal in the Flagship series since the Flagship CLO VI transaction priced in 2007.

Also in the primary market, Apollo Credit Management (CLO) LLC brought an expected CLO deal, the $710.8 million ALM X Ltd./ALM X LLC vehicle.

The Flagship VII and ALM X CLOs both priced the AAA tranches at Libor plus 147 basis points, according to market sources.

AAA-rated spreads have widened from as tight as Libor plus 110 bps to 115 bps in March and April to Libor plus 150 bps area in December, according to market sources.

Some investors hope triple A spreads "will tighten in the new year as bank buyers re-enter the market," Moody's Investors Service said in a CLO report. "That tightening could be limited, though, if investors opt for competing products like CMBS or eye the lower reaches of the CLO capital stack."

In new middle market CLO deals, MCF Capital Management LLC priced $305.9 million of notes, according to a market source. The AAA tranche came at Libor plus 185 bps.

Deutsche sells CLO

The Flagship VII CLO priced $241.1 million of class A-1 senior secured floating-rate notes (/AAA/) at Libor plus 147 bps and $20 million of 3.53% class A-2 senior secured fixed-rate notes (/AAA/) at the top of the capital structure.

The CLO also sold $60.55 million of class B senior secured floating-rate notes (/AA/) at Libor plus 210 bps; $29.2 million of class C deferrable floating-rate notes (/A/) at Libor plus 296 bps; $23.1 million of class D deferrable floating-rate notes (/BBB/) at Libor plus 375 bps; $18.6 million of class E deferrable floating-rate notes (/BB/) at Libor plus 475 bps; $9.55 million of class F deferrable floating-rate notes (/B/) at Libor plus 525 bps and $39.71 million of subordinated notes.

Deutsche Bank Securities Inc. arranged the transaction.

The offering is backed by a revolving pool of broadly syndicated senior secured loans.

Deutsche Asset & Wealth Management, part of Deutsche Bank AG, will manage the CLO.

Apollo prices $710.8 million

Apollo Credit Management priced $710.8 million of notes due Jan. 15, 2025 in the ALM X CLO via Citigroup Global Markets Inc., according to a market source.

ALM X vehicle sold $410 million of class A-1 senior secured floating-rate notes (Aaa/AAA/) at Libor plus 147 bps; $90 million of class A-2 senior secured floating-rate notes (Aa2) at Libor plus 200 bps; $65 million of class B senior secured deferrable floating-rate notes (A2) at Libor plus 260 bps; $42 million of class C deferrable floating-rate notes (Baa3) at Libor plus 330 bps; $37 million of class D deferrable floating-rate notes (Ba3) at Libor plus 460 bps; $13 million of class E deferrable floating-rate notes (B2) at Libor plus 540 bps and $53.8 million of subordinated notes.

Apollo Credit Management will manage the CLO, which is backed by broadly syndicated senior secured corporate loans.

The manager is a subsidiary of New York City-based Apollo Global Management, LLC.

MCF sells $305.9 million

MCF Capital Management sold $305.9 million of notes due Jan. 20, 2024, in the MCF CLO III LLC deal, according to a market source.

The CLO priced $173.25 million of class A senior secured floating-rate notes (/AAA/) at Libor plus 185 bps; $25 million of class B senior secured floating-rate notes (/AA/) at Libor plus 250 bps; $22.25 million of class C deferrable floating-rate notes (/A/) at Libor plus 285 bps; $17 million of class D deferrable floating-rate notes (/BBB/) at Libor plus 310 bps; $25.5 million of class E deferrable floating-rate notes (/BB/) at Libor plus 445 bps and $42.9 million of subordinated notes.

Wells Fargo Securities LLC arranged the offering.

The deal is backed by a revolving pool of middle market senior secured loans.

CLO manager MCF Capital Management, a Laguna Hills, Calif.-based middle market firm, was last in the market in February with the $327,282,000 MCF CLO I LLC deal.

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