Better quality loans see some improvement, but high beta paper is offered only, trader says

By Paul A. Harris

Portland, Ore., April 16 – It is generally true that higher quality leveraged loan paper is seeing some price improvement, a loan trader said on Thursday.

However, the higher beta loan paper, rated single B or triple C, is offered only, the source said, adding that right now there are yawning bid-offer margins, with respect to the paper in question.

The problem, the trader said, is that already stressed CLOs have all of the high beta paper their structures allow.

And the problem will only get worse, the near term, the trader said.

Because on an ongoing parade of ratings downgrades, as the economic fallout of the coronavirus pandemic continues to take hold of corporate borrowers, the already maxed out single B and triple C baskets of the CLOs will become fuller still, as they presently have no means to offload it.

In the primary market Surgery Center Holdings, Inc. talked a $120 million senior secured first-lien term loan due August 2024 with a 1,000 basis points spread to Libor at 96.

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