Fourth-quarter primary pickup forecast; Seix prices $518.5 million; mezzanine notes widen

By Cristal Cody

Tupelo, Miss., Sept. 2 – CLO issuance is expected to ramp up over the week following the long weekend, according to market sources on Tuesday.

“We expect a pickup in issuance after Labor Day, and the primary calendar looks to be quite active through Q4,” Wells Fargo Securities, LLC senior analyst Dave Preston and associate analyst Jason McNeilis said in a note.

CLO offerings expected in the near-term primary market include deals from Silvermine Capital Management LLC and Octagon Credit Investors, LLC. Also, Alcentra Ltd. plans to bring a €414 million transaction via Morgan Stanley & Co. International plc.

In new issuance, Seix Investment Advisors LLC brought $518.5 million of notes due Sept. 15, 2026 in the Mountain View CLO 2014-1, Ltd./Mountain View CLO 2014-1, Corp. transaction, according to a market source.

The CLO priced $316.75 million of class A floating-rate notes at Libor plus 151 basis points at the top of the capital structure.

Morgan Stanley & Co. LLC was the underwriter.

The deal is the Upper Saddle River, N.J.-based firm’s first CLO offering since 2013.

Secondary trading thins

CLO secondary trading remained light in the last half of August, according to the Wells Fargo note.

“What little investor focus that has appeared has been directed at the primary market,” the analysts said. “Mezzanine tranches continue to drift wider, as BB tranches are 50 bps wider since April. Equity tranches have been an exception to the softer tone, as investors have used the volatility of the loan market as an entry point – CLO equity continues to be in high demand.”

U.S. CLO AAA notes traded flat to about 1 bp softer from a month ago at Libor plus 148 bps, while mezzanine notes continue to drift wider, the analysts said.

BBB notes have widened 15 bps over the past month to Libor plus 445 bps. CLO BB notes have eased 20 bps on the month to Libor plus 660 bps.

Euro-denominated CLO AAA notes were quoted flat from early August at Euribor plus 138 bps.

Euro BBB notes have widened 25 bps from a month ago to Euribor plus 375 bps, while BB notes traded 60 bps wider at Libor plus 625 bps, according to the note.

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