Primary slows after record November; PineBridge closes €335 million CLO; euro spreads firm

By Cristal Cody

Tupelo, Miss., Dec. 17 - CLO primary market activity slowed on Tuesday with investors and CLO managers focused on the Volcker Rule and the Loan Syndications and Trading Association's webcast on Wednesday for members to discuss the rule's impact, sources said.

"After a record setting month of global CLO 2.0 supply in November, which witnessed $12.8 billion in CLO issuance, December has experienced a relative slowdown in activity, with $2.6 billion of new CLOs thus far," according to a J.P. Morgan Securities LLC research note.

In November, $10.6 billion of U.S. CLOs and $2.2 billion of European CLOs priced, JPMorgan analysts said.

Year to date, more than $77 billion of U.S. CLOs and more than €7 billion of European CLOs have priced, according to market sources.

New issue U.S. AAA CLO spreads are holding in the Libor plus 145 basis points to 155 bps area, JPMorgan analysts said in the note.

AA CLO spreads are unchanged in December in the Libor plus 185 bps to 220 bps area.

Lower in the capital structure, BB CLO tranches are quoted in the Libor plus 610 bps to 625 bps area, JPMorgan said.

European CLO AAA notes have firmed to Euribor plus 120 bps, while the BB tranches have tightened to the Euribor plus 625 bps area, according to JPMorgan.

"Euro CLO spreads have come in 10-125 bps across the structure since early October, creating a more favorable issuing environment which has led to seven of the 21 Euro CLOs printing this year during that 2.5 month span," the JPMorgan analysts said.

Two European deals have priced so far in December. NIBC Bank NV brought the €306 million North Westerly CLO IV 2013 BV on Thursday, with the €161 million tranche of class A-1 floating-rate notes (/AAA/AAA) priced at Euribor plus 145 bps.

On Dec. 4, GSO Capital Partners LP sold the €615.69 million Richmond Park CLO Ltd. transaction. The CLO priced €351.05 million of class A-1 senior secured floating-rate notes (Aaa//AAA) at Euribor plus 140 bps.

PineBridge Investments LLC announced on Tuesday that it closed on its new €335 million CLO fund, which is the first European CLO to include a variable funding note since the 2008 financial crisis.

PineBridge closes

PineBridge Investments said the €335 million Euro-Galaxy III CLO BV offering of notes due 2027 sold in November has closed.

The transaction features a variable funding note "that provides enhanced flexibility and efficient cash management during the ramp-up phase," PineBridge said.

Euro-Galaxy III CLO sold €67 million of variable funding notes (/AAA/AAA) at Euribor plus 130 bps.

The CLO also priced €94 million of class A-1 senior secured floating-rate notes (/AAA/AAA) at Euribor plus 130 bps at the top of the capital structure and €20.75 million of class E floating-rate notes (/BB/BB) at Euribor plus 520 bps at the bottom of the stack.

"We are very pleased to announce the completion of Euro-Galaxy III and to be a part of the re-opening of the European CLO market," Adeel Shafiqullah, managing director of European leveraged finance at PineBridge, said in the release.

The CLO will invest primarily in European senior secured loans.

Barclays Bank plc arranged the transaction.

The CLO is managed by London-based PineBridge Investments Europe Ltd., a subsidiary of PineBridge Investments.

The deal is backed by a revolving pool of euro-denominated senior secured loans and bonds to broadly syndicated corporate borrowers.

The Euro-Galaxy III transaction is the 19th CLO that PineBridge has completed.

PineBridge's two previously issued CLOs in the European market are the €412.78 million Euro-Galaxy CLO BV deal, completed in September 2006, and the €415 million Euro-Galaxy II CLO BV transaction, completed in August 2007.

PineBridge said its leveraged finance group has managed CLOs since 2000.

As of Tuesday, New York City-based PineBridge had $9.41 billion of leveraged finance assets under management.

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