Alcentra prices €412.8 million CLO; AAAs modestly softer, Bs trade at widest range of year

By Cristal Cody

Tupelo, Miss., Nov. 2 – Alcentra Ltd. tapped the European CLO primary market for the second time this year with a €412.8 million nine-tranche offering of floating-rate, fixed-rate and subordinated notes.

The deal was the second European CLO transaction to price in October, bringing year to date issuance to €20.7 billion in 34 deals, which includes euro-denominated refinancings and issuance across Europe, according to Prospect News data.

European CLO spreads showed some tightening across the capital structure for both 1.0 and 2.0 deals over the previous week, according to a BofA Merrill Lynch report.

“Although Alcentra priced a new deal, spreads finally appear to be benefitting from generally low supply in both the primary and secondary markets, as well as the better tone in broader credit markets over the last few weeks,” the BofA Merrill Lynch analysts said.

In the U.S. primary market, Neuberger Berman Fixed Income LLC priced $511 million of notes in the Neuberger Berman CLO XX, Ltd./Neuberger Berman CLO XX, LLC deal via Morgan Stanley & Co. LLC, a market source said. The senior tranche priced at Libor plus 154 basis points. Final pricing details were not available by press time.

October’s U.S. broadly syndicated CLO issuance of $6.4 billion was the highest over the past three months, according to market analysts.

“September and August issued $5.6 billion and $6 billion, respectively,” Wells Fargo Securities LLC analysts said in a market note on Monday. “Two managers priced their first 2015 deal in October, bringing the 2015 manager count to 84. Although this is far below the 2014 year-to-date manager count of 99, the median deal count is the same, at two deals per manager.”

Spreads soften

U.S. CLO secondary trading was moderate with about $390 million of bonds on BWIC lists over the previous week, with activity concentrated in CLO 2.0 and 3.0 senior tranches, according to the BofA Merrill Lynch report.

“Spreads generally held firm at levels seen over the past couple of weeks, at the widest levels for the year, though trading in some non Volckerized deals drove CLO 2.0/3.0 AAAs modestly wider to the 165 bps context,” the analysts said.

CLO 2.0 AAA-rated notes were seen about 3 bps wider on the week at Libor plus 165 bps. CLO 2.0 B-rated notes were trading unchanged in the Libor plus 1,050 bps area, at the widest range of the year.

Spreads on new-issue A-rated tranches are mostly tight compared to other tranches, according to the Wells Fargo Securities report.

“Single-A spreads are flat on the month and 35 bps tighter than the start of the year,” the Wells Fargo analysts said. “Primary AAA and AA spreads are slightly wider on the month but 5 and 25 bps tighter than the start of the year. The lower end of the capital stack has seen the most widening.”

New-issue BB notes are 90 bps wider and B tranches are 60 bps wider on the month, the report said.

Alcentra sells €412.8 million

In new issuance, Alcentra sold €412.8 million of notes due Nov. 30, 2029 in the Jubilee CLO 2015-XVI BV transaction via J.P. Morgan Securities plc, according to a market source.

The CLO priced €225 million of class A-1 senior secured floating-rate notes at Euribor plus 140 bps and €5 million of 1.68% class A-2 senior secured fixed-rate notes in the senior tranches.

The deal is securitized by a portfolio of primarily euro-denominated broadly syndicated speculative-grade senior secured loans and bonds.

Alcentra has priced two euro-denominated CLOs year to date.

The London-based global asset management firm, an indirect subsidiary of BNY Alcentra Group Holding, Inc., brought three European CLO deals in 2014.

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