CLO issuance climbs to $6.8 billion in October; new issue BBB spreads tighten on month

By Cristal Cody

Tupelo, Miss., Nov. 1 - The CLO market saw about $6.8 billion of new issuance in October, according to informed sources on Friday.

"The new issue market is robust," one source said. "The market is doing OK."

U.S. CLO issuance year to date is now about $65.2 billion, sources said.

Market sources project about $70 billion of U.S. issuance and about €6 billion of European CLO deals for the year.

About €4.8 billion of European CLOs have priced through October, sources report.

November pricing action is expected to stay busy ahead of the usual slowdown in December, according to market sources.

Manager-dependent, new issue AAA note spreads held in the Libor plus 140 basis points to 150 bps range in October, according to a source on Friday.

Across the rest of the CLO capital structure, the "mezzanine part has tightened," the source said. "In October, [BBB-rated tranches] have been pricing in the range of Libor plus 385 bps. They've tightened about 25 basis points for the month."

New York Life on tap

In new deals expected, New York Life Investment Management LLC plans to price $409.75 million of notes due January 2026 in the Flatiron CLO 2013-1 Ltd./Flatiron CLO 2013-1 LLC offering, according to a market source.

The transaction includes $250.75 million of class A-1 notes (Aaa//AAA); $55.75 million of class A-2 notes (Aa2//AA); $17 million of class B notes (A2); $25 million of class C notes (Baa3); $18 million of class D notes (Ba3); $12 million of class E notes (B2) and $31.25 million of subordinated notes.

Merrill Lynch, Pierce, Fenner & Smith Inc. will arrange the offering.

The proceeds will be used to repay parties that provided interim financing and to purchase assets to reach a target portfolio of about $400 million of leveraged loans.

New York Life Investment Management, a subsidiary of New York Life Insurance Co., will manage the CLO.

The deal is expected to close in December.

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