Ares, Pramerica, Credit Suisse Asset Management on tap to price European CLOs; trading slows

By Cristal Cody

Tupelo, Miss., June 28 - Financial markets are expected to be choppy in the upcoming short holiday week with key job data on the calendar, but a handful of CLO deals are expected to price, including Ares Management LLC's offering, according to market sources.

"Some arrangers want to get deals out the door before that, but after Tuesday of next week, we do expect it to slow down for a few days," a source said.

Issuance in the market hit nearly $42 billion for the first half of the year, on track to meet the $70 billion in total yearly issuance forecast.

About $18 billion of new CLO deals are reported in the pipeline, up from $17 billion the previous week.

Both Halcyon Loan Advisors Funding 2013-2 Ltd./ Halcyon Loan Advisors Funding 2013-2 LLC and Ares European CLO VI Ltd. deals are expected to price in the first week of July, a source said.

CLO manager Halcyon Loan Advisors 2013-2 LLC, a subsidiary of Halcyon Loan Advisors LP, plans to sell $465.5 million of notes in the offering.

Ares Management plans to bring €300 million of notes.

Europe deals resume

Issuance in Europe is expected to pick up over the summer after the market slowed following new proposed risk retention rules for CLO managers, sources said.

"In Europe, there's actually a slew of deals that are set to price again," one source said. "They're going to be at wider levels, just like here in the U.S., but there will still be some issuance despite the rule change."

New deals on the calendar for July and August include Pramerica Investment Management Ltd., which plans to bring its second European CLO offering of the year, according to an informed source.

Investec Securities Ltd. is the placement agent.

Prudential closed the €300 million Dryden XXVII Euro CLO 2013 BV offering of seven tranches of notes due June 25, 2025, its first European CLO deal since the financial crisis, in May.

Credit Suisse Asset Management, LLC also is expected to price a €300 million CLO via BofA Merrill Lynch, according to an informed source.

Total European CLO issuance is projected at about €5 billion to €7 billion for 2013.

"The market just backed off a little bit after the news about the risk retention, and the market was a bit softer from volatility, but now it seems that there's investor demand again for European CLOs," the source said.

In the U.S. secondary market, spreads have widened over the month in the volatility over when the Federal Reserve will taper its $85 billion-a-month asset purchases, though spreads were slightly better mid-week, sources said.

"The CLO market saw another week of widening, with most of the price pain in the BBB and BB levels," Dave Preston, senior analyst at Wells Fargo Securities, LLC, said in a note. "Many investors were reluctant to sell at low levels. Thus far, the CLO market has not seen a large amount of forced selling."

U.S. 2.0 CLO BBB-rated tranches traded at Libor plus 475 bps on average on the week. AAA-rated notes were seen at Libor plus 130 bps.

"CLO 1.0 deals were not immune to widening, either," Preston said. "However, while spreads were wider, in many cases, trading slowed."

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