Europe’s Harvest X prices; Babson prices third CLO this year; secondary ‘fairly active’

By Rebecca Melvin

New York, Oct. 3 – Pricing emerged for European collateralized loan obligation Harvest X CLO Ltd. on Friday, which is a deal for €466.5 million of notes due November 2028. It was the European market’s second CLO priced this week. Pricing for Contego CLO II BV’s €359.3 million CLO was reported Thursday.

In the U.S., Babson Capital Management LLC priced a $724 million CLO due Jan. 15, 2026, representing the firm’s third CLO priced this year.

“The primary was active enough,” a New York-based trader said. “There were two Euro deals and a middle market deal that got priced tight for a middle market deal.”

The Ivy Hill Middle Market Credit Fund IX’s triple-AAA tranche priced at Libor plus 170 basis points.

“The new issue machine is running into technical difficulties because there is a lot of supply. Double-Bs and single-Bs blowing out some for the weaker and newer managers, but for the bigger players” the market is strong, the trader said.

For top tier players like Babson pricing is very tight. And for the European CLO managers pricing is even tighter. The Harvest X CLO saw its triple-A tranche price at 125 bps over Euribor, for example. Europe’s tighter pricing is probably a function of there being much less new issue supply in Europe than in the United States.

The secondary market was “fairly active” this past week, the trader said, despite it being truncated somewhat due to the Jewish holiday bookends, including Rosh Hashana last week and Yom Kippur this week, the trader said.

“Equities were in flux, and other credit markets were in flux, but the BWIC list was active with a lot of triple AAAs, single Bs and 2.0 BBs,” the trader said.

A typical 2.0, triple-A tranche traded in the range of 145 bps to 150 bps. That was neither a drop nor of an improvement. But trading action was concentrated in the higher-grade tranches perhaps aligning with the risk-off mode of the broader markets earlier this week.

“Things are in line with the general market right now; they weren’t up or down,” he said.

3i Debt prices Harvest CLO

3i Debt priced €466.5 million of notes due November 2028 in the Harvest IX CLO Ltd.

It sold €264.4 million of class A senior secured floating-rate notes (/AAA/) at Euribor plus 125 bps and €56.3 million of class B senior secured floating-rate notes (/AA/) at Euribor plus 207 bps.

Lower in the capital structure, the CLO priced €30.4 million of class C senior secured deferrable floating-rate notes (/A/) at Euribor plus 230 bps; €23.6 million of class D senior secured deferrable floating-rate notes (/BBB/) at Euribor plus 320 bps; €29.2 million of class E senior secured deferrable floating-rate notes (/BB/) at Euribor plus 500 bps and €12.4 million of class F senior secured deferrable floating-rate notes (/B/) at Euribor plus 600 bps.

The deal included €50.2 million of subordinated notes in the equity tranche.

Co-arrangers were Resource Capital Markets Inc. and HSBC Bank plc.

3i Debt Management will manage the CLO, which is backed primarily by broadly syndicated senior secured loans to speculative grade European corporates.

The CLO has a two-year non-call period and a four-year reinvestment period.

3i Debt Management was last in the European market in July with the €525 million Harvest IX CLO deal.

Babson prices 2014-III deal

The Babson CLO 2014-III priced $724 million of floating-rate, fixed-rate and subordinated notes in a CLO due Jan. 15, 2026, including $4 million of class X senior floating-rate notes (Aaa/AAA/) at Libor plus 100 bps and $426.25 million of class A senior secured floating-rate notes (Aaa/AAA/) at Libor plus 144 bps.

The CLO also priced $59 million of class B-1 senior secured floating-rate notes (Aa2) at Libor plus 220 bps; $30 million of 4.39% class B-2 senior secured fixed-rate notes (Aa2); $54.5 million of class C senior secured deferrable floating-rate notes (A2) at Libor plus 324 bps; $37.5 million of class D senior secured deferrable floating-rate notes (Baa3) at Libor plus 358 bps; $36.25 million of class E senior secured deferrable floating-rate notes (Ba3) at Libor plus 537 bps; $14 million of class F senior secured deferrable floating-rate notes (B3) at Libor plus 555 bps and $62.5 million of subordinated notes.

Babson priced its 2014-III only weeks ago in September. For the bigger players, it wouldn’t be difficult to have the deals come that closely together, a New York-based trader said.

Babson priced the $566.25 million Babson CLO 2014-II Ltd./Babson CLO 2014-II LLC in early September and the $514.21 million Babson CLO 2014-I Ltd./Babson CLO 2014-I LLC offering on May 9.

The global asset management firm is based in Boston, Springfield, Mass., and Charlotte, N.C.

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