April issuance strong, $16 billion of deals in pipeline; new CLO AAA tranches range-bound

By Cristal Cody

Tupelo, Miss., April 4 - Total year-to-date CLO issuance climbed to more than $24 billion following new U.S. and European deals over the week, according to informed sources on Friday.

In the broadly syndicated and middle-market CLO sector, about $16 billion of deals are in the pipeline, a source said.

New U.S. and European CLO AAA tranches remain mostly range-bound, according to market sources.

"This week, the market was able to digest several large lists," Wells Fargo Securities, LLC senior analyst Dave Preston and associate analyst Jason McNeilis said in a note on Friday. "We note that AAA spreads have remained largely unchanged during the pickup in issuance, likely due to the large amount of supply. However, spreads in the mezzanine tranches showed more variance, as manager tiering was more pronounced."

In a deal brought on Thursday, GSO Capital Partners LP priced the $510.32 million Pinnacle Park CLO Ltd./Pinnacle Park CLO LLC offering class A slice at Libor plus 150 basis points.

THL Credit Advisors LLC brought a $620.4 million CLO deal over the week and placed the AAA tranche at Libor plus 152 bps.

In the middle-market CLO sector, Fortress Investment Group LLC priced an $800 million deal, its first in the series since 2004, and sold the AAA tranche at Libor plus 190 bps, according to an informed source.

In the European CLO market, Blackstone/GSO Debt Funds Management Europe Ltd. brought the €513.63 million Holland Park CLO Ltd. transaction and priced the AAA notes at Euribor plus 140 bps.

CLO equity tranches may get squeezed as new issue spreads and Libor floors continue to decline, according to Barclays analysts Bradley Rogoff and Eric Gross on Friday.

"The par-weighted average Libor spread for new issues is now 365 bps, down 26 bps since the beginning of the year; issuers have also shaved 5 bps off the average Libor floor over the same period, taking it down to 91 bps," the analysts said in a note. "The decline in Libor floors is particularly concerning for CLO equity, since the value of the floors accrues exclusively to that tranche."

GSO details new deal

GSO Capital Partners priced $510.32 million of notes due April 15, 2026 in the Pinnacle Park CLO offering via Wells Fargo Securities LLC, according to an informed source.

The CLO priced $307.5 million of class A senior secured floating-rate notes (Aaa//AAA) at Libor plus 150 bps; $63.75 million of class B senior secured floating-rate notes (Aa2) at Libor plus 210 bps; $28,125,000 of class C secured deferrable floating-rate notes (A2) at Libor plus 310 bps; $31.25 million of class D secured deferrable floating-rate notes (Baa3) at Libor plus 350 bps; $29,375,000 of class E secured deferrable floating-rate notes (Ba3) at Libor plus 495 bps and $5,938,000 of class F secured deferrable floating-rate notes (B2) at Libor plus 555 bps.

The deal included $44,385,000 of subordinated notes in the equity tranche.

GSO/Blackstone Debt Funds Management LLC, a New York City-based subsidiary of alternative asset manager GSO Capital Partners, will manage the CLO.

Proceeds from the deal will be used to purchase a $500 million portfolio of primarily senior secured leveraged loans.

GSO Capital Partners was in the U.S. CLO primary market in 2013 with the $413.35 million Keuka Park CLO, Ltd./Keuka Park CLO, LLC offering and the $515.95 million Tryon Park CLO, Ltd./Tryon Park CLO Corp. deal.

THL Credit sells CLO

THL Credit Advisors sold $620.4 million of notes due April 20, 2026 in the THL Credit Wind River 2014-1 CLO Ltd./THL Credit Wind River 2014-1 CLO LLC deal, according to a market source.

The CLO priced $369.25 million of class A senior secured floating-rate notes (Aaa) at Libor plus 152 bps; $55.5 million of class B-1 senior secured floating-rate notes (Aa2) at Libor plus 210 bps; $15 million of 4.73% class B-2 senior secured fixed-rate notes (Aa2); $54 million of class C secured deferrable floating-rate notes (A2) at Libor plus 290 bps; $31.5 million of class D secured deferrable floating-rate notes (Baa3) at Libor plus 355 bps; $33.5 million of class E secured deferrable floating-rate notes (Ba3) at Libor plus 495 bps and $61.65 million of subordinated notes.

Deutsche Bank Securities, Inc. was the underwriter.

THL Credit Advisors will manage the CLO.

Boston-based THL Credit was in the primary market in 2013 with the $467.1 million THL Credit Wind River 2013-1 CLO Ltd./THL Credit Wind River 2013-1 CLO LLC offering and the $447.11 million THL Credit Wind River 2013-2 CLO Ltd./THL Credit Wind River 2013-2 CLO LLC deal.

Fortress sells CLO

Fortress Investment Group sold $800 million of notes due April 28, 2026 in the middle-market CLO deal via Natixis Securities America LLC, according to an informed source.

Fortress Credit Opportunities III CLO LP priced $100 million of class A-1R floating-rate revolving notes (/AAA/) at Libor plus 190 bps $228 million of class A-1T floating-rate notes (/AAA/) at Libor plus 190 bps and $40 million of class A-2T floating-rate revolving notes (/AAA/) at Libor plus 165 bps for the first eight payment periods and Libor plus 225 bps thereafter.

Lower in the capital structure, the CLO priced $20 million of class B-1 floating-rate notes (/AA/) at Libor plus 250 bps; $68 million of 4.95% class B-2 fixed-rate notes (/AA/); $64 million of class C deferrable floating-rate notes (/A/) at Libor plus 325 bps; $56 million of class D deferrable floating-rate notes (/BBB/) at Libor plus 425 bps; $48 million of class E deferrable floating-rate notes (/BB/) at Libor plus 625 bps and $176 million of partnership interests in the equity tranche.

FCO III CLO GP LLC will manage the CLO and enter into a services agreement with Drawbridge Special Opportunities Advisors LLC, a subsidiary of Fortress Investment Group.

New York City-based Fortress Investment Group was in the market in March 2013 with the $412 million Fortress Credit BSL Ltd./Fortress Credit BSL LLC transaction.

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