New CLO spreads firm since June with AAA notes at 125 bps spread; deal pipeline light

By Cristal Cody

Tupelo, Miss., July 26 - CLO new issue spreads are tighter since June, though the deal pipeline remains light, according to market sources on Friday.

Year to date, the CLO primary market has seen $45.5 billion in 94 deals, according to Barclays.

"CLO spreads have tightened slightly across the stack since the end of June," Bradley Rogoff, an analyst with Barclays, said in a note on Friday.

AAA-rated notes have priced 5 basis points tighter during July at Libor plus 125 bps, and AA and A tranches have come 10 bps tighter, he said. BBB spreads on average have priced 20 bps tighter, and BB notes are in about 35 bps, he said.

Ares Management Ltd.'s €310.5 million collateralized loan obligation sold a week ago included €177 million of class A senior secured floating-rate notes priced at three-month Euribor plus 125 bps and a BB-rated €19 million slice priced at three-month Euribor plus 450 bps, according to market sources.

The Ares XXVII CLO Ltd./Ares XXVII CLO LLC, which closed on Friday, priced with spreads of Libor plus 125 bps for the triple A-rated slice, while the BB-rated tranche priced at Libor plus 485 bps, sources said.

In other new issuance, Golub Capital Partners CLO 16, Ltd./Golub Capital Partners CLO 16 LLC priced the class A senior secured floating-rate notes at Libor plus 165 bps and the A2-rated tranche of mezzanine secured deferrable floating-rate notes at Libor plus 320 bps.

"Despite the slowdown in CLO issuance, we believe the current environment of heightened duration aversion will continue to support demand," Rogoff said.

Coming up in new European issuance, GSO Capital Partners LP is prepping for its previously announced €410 million Herbert Park CLO that is expected to price in August or September, according to an informed source.

Deutsche Bank Inc. is the underwriter.

Blackstone/GSO Debt Funds Management Europe Ltd., a unit of Blackstone Group LP, will manage the European arbitrage cash flow CLO.

The deal will be Blackstone/GSO's second European CLO offering this year. The €403.35 million Grand Harbour I BV CLO priced in May with the triple A tranche offered at Euribor plus 130 bps.

Ares European CLO detailed

Ares Management's euro-denominated CLO included five tranches of notes due Oct. 15, 2025, according to informed sources on Friday.

Ares European CLO VI Ltd. sold €177 million of the class A senior secured floating-rate notes (Aaa/AAA/) at three-month Euribor plus 125 bps; €28 million of class B senior secured floating-rate notes (/AA/) at three-month Euribor plus 175 bps; €25 million of class C senior secured deferrable floating-rate notes (/A/) at three-month Euribor plus 275 bps; €15.5 million of class D senior secured deferrable floating-rate notes (/BBB/) at three-month Euribor plus 390 bps and €19 million of class E senior secured deferrable floating-rate notes (/BB/) at three-month Euribor plus 450 bps.

The sale included €46 million of subordinated notes.

Ares Management will hold 5% of the subordinated notes to meet the European risk retention requirement under Article 122a.

Credit Suisse Securities (Europe) Ltd. was the underwriter.

The deal is expected to close on Sept. 3.

Golub CLO prices

CLO manager GC Investment Management LLC sold $502.51 million in the CLO offering of notes due July 25, 2024, according to market sources.

Golub Capital Partners CLO 16 priced $275 million of the class A notes (Aaa/AAA/) at Libor plus 165 bps; $50 million of class B senior secured floating-rate notes (Aa2) at Libor plus 230 bps; $45 million of class C mezzanine secured deferrable floating-rate notes (A2) at Libor plus 320 bps and $132.51 million of subordinated notes.

Wells Fargo Securities, LLC was the underwriter.

The deal is scheduled to close on Aug. 6.

Ares XXVII CLO closes

Ares Management LLC closed Friday on the $412.8 million CLO offering of notes due July 28, 2025, according to market sources.

Ares XXVII CLO sold $99 million of class A-1 senior floating-rate notes (Aaa/AAA/) at Libor plus 125 bps; $150 million of class A-2 senior floating-rate notes (Aaa/AAA/) at Libor plus 100 bps for the first 18 months, 150 bps for the following 12 months and 175 bps thereafter; $46 million of class B senior floating-rate notes (/AA/) at Libor plus 180 bps; $34 million of class C mezzanine deferrable floating-rate notes (/A/) at Libor plus 275 bps; $22 million of class D mezzanine deferrable floating-rate notes (/BBB/) at Libor plus 375 bps; $17.8 million of class E mezzanine deferrable floating-rate notes (/BB/) at Libor plus 485 bps and $44 million of subordinated notes.

Goldman Sachs & Co. arranged the deal.

Ares CLO Management XXVII LP is the CLO manager.

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