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CLO primary quiet as market waits for Volcker Rule clarification; European CLO prices rise
By Cristal Cody
Tupelo, Miss., Jan. 10 - The collateralized loan obligation market stayed quiet on Friday with the focus on upcoming clarification of the new Volcker Rule, according to informed sources.
Primary action is anticipated to resume in the week ahead, market sources said.
"There will be one deal that gets priced prior to the 21st, but there's a certain camp that wants to wait and see if there is further clarification," a source said.
Regulators are expected to provide an update by Wednesday.
Under the Volcker Rule issued on Dec. 10, banks may not hold ownership interests in CLOs that hold securities.
In the U.S. deal pipeline, MidOcean Credit Partners intends to price a $414.75 million CLO, Redan Park Asset Management LLC plans a $300 million CLO and Feingold O'Keefe Capital, LLC is set to sell a $400 million CLO.
The Carlyle Group LP is marketing a new European CLO transaction expected to be in the €350 million to €400 million area, according to an informed source.
New CLO AAA tranches have priced on average around Libor plus 150 basis points during December, Morgan Stanley & Co. LLC analysts Vishwanath Tirupattur and Mia Qian said in a note.
"The elevated AAA spread levels continue to pose challenges to new issue arbitrage levels," the analysts said.
Secondary U.S. CLO prices moved up marginally across the capital structure in December, while European CLO prices rallied, according to the note.
U.S. AAA prices and AA prices remain largely unchanged, while A-rated tranches rose 0.125 of a point, BBB notes edged up 0.25 of a point and BB-rated notes rose 0.5 of a point.
"Secondary European CLO prices rallied across the capital structure in December, with AAAs up 0.15 point, AAs up 0.25 point, single-As up 0.1 point, BBBs up 0.25 point and BBs up 0.85 point," the analysts said.
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