Invesco prices $513.5 million; Fifth Street eyes middle-market CLO; secondary trading thin

By Cristal Cody

Tupelo, Miss., Aug. 21 – Invesco Senior Secured Management, Inc. tapped the CLO market with a $513.5 million deal, while a middle-market CLO manager plans to bring an offering, according to sources on Friday.

Fifth Street CLO Management LLC is in the pipeline with a $416.6 million CLO backed by middle-market loans.

“On the CLO primary side, August is shaping up to be another light month,” Wells Fargo Securities, LLC senior analyst Dave Preston and associate analyst Mackenzie Miller said in a note on Friday. “CLO managers have priced seven deals for $3.9 billion month to date, which is less than half the CLO volume priced in July.”

The primary market “may see a challenging September” with factors including a heavy pipeline of commercial mortgage backed securities, the Labor Day holiday and the Federal Reserve’s policy meeting, but fourth-quarter issuance could be strong with pressure to issue before year-end, the analysts said.

CLO AAA spreads are mostly unchanged from the same period a year ago in the Libor plus 150 basis points area, according to the note.

In the secondary market, trading was thin over the week “as secondary sellers found waning interest and wider bids amid broad market turbulence,” the Wells Fargo analysts said. “The sell-off in equities and oil, and continued pressure in high yield left CLO investors wary to step in and buy with future volatility expected.”

Barclays Bank plc CLO analysts said in a note on Friday that the secondary market has been focused on exposure to energy collateral in deals since the start of the year.

“The continued struggles in the energy and metals & mining industries have weighed on CLOs, the largest buyer of leveraged loans,” the Barclays analysts said. “CLO tranches have consistently traded with energy exposure in mind, and deals with outsized exposures have found bids much harder to come by.”

Invesco prices $513.5 million

Invesco Senior Secured Management priced $513.5 million of notes due Oct. 20, 2027 in the firm’s second CLO transaction of the year, according to a market source.

Recette CLO, Ltd./Recette CLO, LLC sold $185 million of class A-1 floating-rate notes at Libor plus 143 bps at the top of the capital stack.

BofA Merrill Lynch arranged the deal.

The transaction is collateralized primarily by senior secured loans.

Proceeds from the transaction will be used to purchase assets to reach a target portfolio of about $500 million of mostly senior secured leveraged loans.

Invesco Senior Secured Management previously was in the market in February with the $618 million Betony CLO Ltd./Betony CLO LLC offering.

The subsidiary of Atlanta-based Invesco, Ltd. priced two CLO deals in 2014.

Fifth Street offers CLO

Fifth Street CLO Management plans to price a $416.6 million CLO offering backed by middle-market loans, according to a source on Friday.

The Fifth Street SLF II Ltd./Fifth Street SLF II LLC deal includes $20 million of class A-1R revolving notes (/AAA); $170.8 million of class A-1T floating-rate notes (/AAA); $40.6 million of class A-1F fixed-rate notes (/AAA); $40.6 million of class A-2 floating-rate notes; $39.6 million of class B deferrable floating-rate notes; $22.3 million of class C deferrable floating-rate notes; $35.2 million of class D deferrable floating-rate notes and $52.1 million of subordinated notes.

Natixis Securities America LLC is the underwriter.

Fifth Street CLO Management will manage the CLO.

The notes are due Sept. 30, 2027.

The deal is backed by a revolving pool of middle-market loans.

Fifth Street CLO Management is a subsidiary of Fifth Street Asset Management Inc., an alternative asset management firm based in Greenwich, Conn.

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