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CLO primary quiet, hints of strong pipeline for first half of year; secondary spreads flat
By Cristal Cody
Tupelo, Miss., Jan. 21 – CLO primary and secondary market activity remains mostly quiet with action expected to pick up over the next couple of months, according to informed sources on Wednesday.
CLO managers 3i Debt Management U.S. LLC, PineBridge Investments LLC and Apollo Credit Management (CLO) LLC are in the deal pipeline with transactions expected to price in the near-term, sources said.
“The primary market has gotten off to another slow start in 2015,” Wells Fargo Securities, LLC senior analyst Dave Preston and associate analyst Jason McNeilis said in a note.
“Volatility across asset classes has led to a slowdown in secondary activity, as investors appear to have no real incentive to enter a market [that] may be subject to volatility that enters from other markets,” the analysts said. “Generally, spreads are flat, but investors are showing little conviction at this point.”
AAA spreads are mostly unchanged in the Libor plus 155 basis points area, according to market sources.
In 2014, 106 managers issued a CLO – the highest number of managers that have priced a deal in a single year on record, according to Wells Fargo. In 2013, 92 managers brought CLO deals.
CLO issuance should stay robust for the first half of the year, according to an Appleby Global Group Services Ltd. report released on Wednesday.
Market analysts generally forecast as much as $120 billion of CLO issuance for the year.
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