CLO primary pace light; Sound Point CLO III expected to price in line with recent deals

By Cristal Cody

Tupelo, Miss., July 29 - Some pricing action is expected in the U.S. collateralized loan obligation market over the week, according to informed sources on Monday.

"It's been pretty quiet for the last couple of weeks," one informed source said. "It's still going to be pretty quiet, but there could be a deal or two that price."

Sound Point Capital Management LP plans to offer a $420.8 million CLO, Sound Point CLO III, Ltd., according to informed sources.

The $248 million slice of class A senior floating-rate notes (Aaa//AAA) is expected to price at Libor plus 135 basis points, in line with other deals that have recently printed, a source said.

Sound Point on tap

Sound Point CLO III intends to bring nine tranches of notes due Aug. 13, 2025, according to informed sources.

The deal also includes $53.5 million of class B senior floating-rate notes (Aa2); $20 million of class C-1 floating-rate mezzanine secured notes (A2); $5 million of class C-2 fixed-rate mezzanine secured notes (A2); $23.5 million of class D mezzanine secured floating-rate notes (Baa3); $19 million of class E junior secured floating-rate notes (Ba3); $8.8 million of class F junior secured floating-rate notes (B2); $4 million of class X senior floating-rate notes (Aaa//AAA); and $39 million of subordinated notes.

Morgan Stanley & Co. LLC is the underwriter.

The CLO is backed primarily by broadly syndicated first-lien senior secured corporate loans.

The portfolio is expected to be about 70% ramped at closing and 100% ramped within the following six months.

The deal is scheduled to close on Aug. 13.

The New York-based asset manager plans to use the proceeds to purchase a $400 million portfolio of mostly leveraged loans.

Euro deals

In the European CLO market, Moody's Investors Service said in a report on Monday that there were no major defaults or upgrades of European Caa-related obligors in May.

"Nevertheless, collateral managers' credit risk sales allowed European CLOs to reduce their average exposure to Caa assets, to 11.2% from 12.8% in April," Moody's said. "The recent revival of the European leveraged loan market and CLO par haircuts for Caa-rated assets are two of the reasons that led CLO managers to reduce the Caa exposures."

The European primary market started to pick back up in late July with Ares Management Ltd.'s €310.5 million CLO and Intermediate Capital Group plc's €400 million deal.

GSO Capital Partners LP has the €410 million Herbert Park CLO offering via underwriter Deutsche Bank Inc. in the pipeline for August or September, according to a market source.

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