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CLO primary stays quiet; U.S. CLO tranches flat; European CLO BBB, BB notes tighten
By Cristal Cody
Tupelo, Miss., Jan. 13 - Collateralized loan obligation issuance is expected to ramp up with one potential deal likely to price later in the week, according to informed sources.
"There has been no new issuance in January thus far, as the CLO market remains in wait-and-see mode and awaits further clarification on the Volcker Rule," J.P. Morgan Securities plc analysts said in a note.
Under the Volcker Rule issued on Dec. 10, banks may not hold ownership interests in CLOs that hold securities. Regulators are expected to provide additional clarification by Wednesday.
About $12 billion of broadly syndicated deals are in the pipeline.
MidOcean Credit Partners is expected to price a $414.75 million CLO, while Redan Park Asset Management LLC plans a $300 million CLO and Feingold O'Keefe Capital, LLC intends to price a $400 million CLO.
The Carlyle Group LP is kicking off the 2014 European CLO deal pipeline with a transaction expected to be in the €350 million to €400 million area, according to an informed source.
Euro CLO notes firm
In the secondary market, new issue U.S. CLO AAA notes are flat on the week at Libor plus 145 basis points to Libor plus 155 bps, according to JPMorgan. AA-rated note spreads are quoted at Libor plus 210 bps to Libor plus 240 bps.
Further down the capital structure in the secondary market, BBB-rated CLO notes traded unchanged at Libor plus 400 bps to Libor plus 425 bps, while BB-rated tranches are flat at Libor plus 600 bps to Libor plus 625 bps, the analysts said.
European BBB and BB CLO spreads have tightened since the start of the year, according to the report. BBB-rated CLO notes have come in 65 bps since Jan. 3 to Euribor plus 375 bps. European BB CLO notes firmed 35 bps over the first two weeks of the year to Euribor plus 575 bps, the analysts said.
The top of the stack remains unchanged with European AAA CLO notes at Euribor plus 125 bps and AA tranches at Euribor plus 180 bps, according to JPMorgan.
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