Triple A-rated CLOs ease, notes forecast to come in late in year; backlog of deals in works

By Cristal Cody

Tupelo, Miss., June 5 - Trimaran Advisors, LLC sold the Aaa-rated tranche of notes in its $465 million CLO transaction at Libor plus 115 basis points as spreads have eased 3 bps from the tightest spreads seen since 2008, according to informed sources on Wednesday.

Triple A-rated CLO notes were quoted at Libor plus 115 bps, wider than where they were seen at Libor plus 112 bps in May.

AAA-rated CLO tranches are forecast to tighten in the second half of the year and even breach 100 bps by year-end, Dave Preston, senior analyst at Wells Fargo Securities, LLC, said in a note on Wednesday.

Although triple A-tranches are harder to place, CLO issuance is not expected to slump off for 2013, sources said.

"We believe that AAA buyers will return, and reiterate our forecast of U.S. CLO issuance of $70 billion-$80 billion," Preston said.

"We see a flat to tighter loan market as a catalyst to push AAA levels tighter. If investors react to Treasury rate moves by rotating from high-yield funds to loan funds, the pressures on the loan market could continue."

If loan spreads tighten, CLO AAA spreads would follow suit, unless issuance stops or CLO equity investors accept lower returns, he said.

In the secondary market, other tranches remain unchanged from May, according to market sources.

U.S. CLO AA-rated tranches are quoted at Libor plus 240 bps, while BB-rated tranches are in the 550 bps plus Libor area.

The CLO deal pipeline likely will be steady through June, with a backlog of offerings on tap, according to market sources.

Standard & Poor's said it has more than $15 billion of CLOs in the rating process.

Carlyle Investment Management LLC is expected to price a $500 million CLO via Citigroup Global Markets Inc.

KKR Financial CLO 2013-1 also plans to be in the market with a $400 million CLO.

Citigroup is the arranger and KKR Capital Markets LLC is the placement agent.

A CLO transaction from Boston-based Sankaty Advisors LLC also is in the works for early June, according to a market source. BofA Merrill Lynch is the placement agent.

Trimaran sells Aaa-rated tranche at Libor plus 115 bps

In Trimaran's Catamaran CLO 2013-1 Ltd./Catamaran CLO 2013-1 LLC offering of notes due Jan. 27, 2025, $277.8 million of the class A floating-rate notes (Aaa//) priced at Libor plus 115 bps, according to a market source.

Trimaran also sold $61 million of class B floating-rate notes at Libor plus 175 bps; $33.75 million of class C deferrable floating-rate notes at Libor plus 260 bps; $23.35 million of class D deferrable floating-rate notes at Libor plus 375 bps; $19.7 million of class E deferrable floating-rate notes at Libor plus 500 bps; $10.7 million of class F deferrable floating-rate notes at Libor plus 550 bps; and $38.7 million of subordinated notes.

Credit-Suisse Securities (USA) LLC was the underwriter.

The deal is New York-based Trimaran's second CLO transaction since it was acquired by KCAP Financial, Inc. in 2012.

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