Neuberger Berman refinances second CLO; July volume thin; deals likely before month’s end

By Cristal Cody

Eureka Springs, Ark., July 13 – Neuberger Berman Fixed Income LLC refinanced $355.25 million of vintage CLO notes in its second refinancing transaction since June.

Neuberger Berman Fixed Income refinanced four tranches from the vintage 2014 Neuberger Berman CLO XVI, Ltd./Neuberger Berman CLO XVI, LLC deal.

Neuberger also refinanced $183 million class A-2R-R floating-rate notes at par to yield Libor plus 130 basis points on June 30 in the Neuberger Berman CLO XII, Ltd./Neuberger Berman CLO XII, LLC transaction.

The market has seen four CLO refinancings over the past two weeks and a total of six refinancings of $1,334,000 of notes year to date, according to Deutsche Bank Securities Inc. on Wednesday.

Most of the CLO refinancings this year have been driven by the “need to refinance step-up tranches,” Deutsche Bank Securities analyst Bjarni Torfason said in a note. “None of the six refinancings this year has been done to directly take advantage of tighter spreads.”

As previously reported, the Neuberger Berman CLO XII deal, American Capital CLO Management, LLC’s ACAS CLO 2013-2, Ltd. transaction and Carlyle Investment Management LLC’s Carlyle Global Market Strategies CLO 2013-4, Ltd./Carlyle Global Market Strategies CLO 2013-4 LLC deal refinanced step-up tranches.

“According to our count there have been some 26 US CLOs issued with step-up tranches since 2013, and another three step-up tranches have been created through refinancings,” Torfason said.

“Of those 29 tranches, 23 have been in broadly syndicated loan CLOs. Of the 23 tranches, six have now been refinanced, on average 26 months after the initial deal closing,” he said. “The remaining 17 tranches are at different stages in terms of the step-up coupon. There are nine tranches still outstanding with coupons of L+175 bps or higher, which, given current levels should likely be refinanceable at lower coupons.”

New CLO issuance has been mostly quiet so far in July with two new deals priced over the month.

Apex Credit Partners LLC sold $354 million notes in the JFIN CLO 2016-1 Ltd./JFIN CLO 2016-1 LLC deal via Jefferies LLC, a market source said. Final pricing details were not available by press time.

“Issuance was quiet last week, as would have been expected given the holiday weekend,” Torfason said. “Two deals had priced in the month at the end of last week but the pipeline is strong and we expect issuance to pick up in the remainder of the month.”

Neuberger Berman refinances

Neuberger Berman Fixed Income refinanced $355.25 million of notes due April 15, 2026 in the Neuberger Berman CLO XVI deal, according to a market source.

Neuberger Berman CLO XVI priced $330.5 million of class A-1-R senior secured floating-rate notes at Libor plus 145 bps, $5 million of 2.32% class A-2-R senior secured fixed-rate notes, $18.75 million of class B-2-R senior secured floating-rate notes at Libor plus 217 bps and $1 million of class C-2-R mezzanine secured deferrable floating-rate notes at Libor plus 275 bps.

BofA Merrill Lynch was the refinancing agent.

Neuberger Berman originally sold $572 million of notes in 11 tranches in the deal on Feb. 11, 2014.

Proceeds from the refinancing will be used to redeem the original notes.

The CLO manager has priced one new CLO transaction and refinanced two vintage CLOs year to date.

The Chicago-based firm, part of Neuberger Berman Group, LLC, brought two transactions to market in 2015.

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