AAAs may tighten under risk rules; Napier Park sells $514.5 million CLO; CVC prices

By Cristal Cody

Tupelo, Miss., Oct. 22 – Although CLO issuance is projected to potentially fall after 2016 when risk retention rules take effect, tighter AAA spreads could be the upside, Barclays said on Wednesday.

The Federal Deposit Insurance Corp. on Tuesday released final risk retention rules that require CLO managers to retain 5% capital of new deals starting in October 2016.

CLOs issued before Oct. 21, 2016 will be grandfathered under the securitization risk retention requirement required under the Dodd-Frank Act.

“Obvious implications include a possible rise in manager concentration and slower issuance, but benefits may eventually also include tighter U.S. AAA spreads and an improved CLO equity arb,” Barclays analysts said in a note on Wednesday. “AAA spreads in the U.S. have been stubbornly wide over the past 18 months, as the market has arguably been overwhelmed by supply.”

New CLOs have priced AAA tranches on average in the Libor plus 150 basis points to Libor plus 160 bps area.

Napier Park, CVC price

In new CLO primary activity, Napier Park Global Capital (US) LP priced its third CLO deal of the year.

The New York City-based global alternative asset manager sold $514.5 million of notes due Oct. 25, 2026 in the Regatta V Funding Ltd./Regatta V Funding LLC offering, according to a market source.

The CLO priced $227 million of class A-1A floating-rate notes at Libor plus 156 bps at the top of the capital structure.

At the bottom of the capital stack, the CLO placed $27.7 million of class D deferrable floating-rate notes at Libor plus 490 bps.

Citigroup Global Markets Inc. was the placement agent.

Napier Park Global Capital was previously in the primary market this year with the $492.36 million Regatta III Funding LP/Regatta III Funding LLC deal in February and the $626 million Regatta IV Funding Ltd./Regatta IV Funding LLC transaction in May.

In other primary activity, CVC Credit Partners, LLC brought its third CLO deal of the year.

The credit management arm of London-based private equity firm CVC Capital Partners Ltd. sold $512.65 million of notes due Oct. 19, 2026 in the Apidos CLO XIX/Apidos CLO XIX LLC transaction via Wells Fargo Securities LLC, according to a market source.

The Apidos CLO XIX sold $270 million of class A-1 senior secured floating-rate notes at Libor plus 150 bps at the top of the capital structure and $7.5 million of class F deferrable floating-rate notes at Libor plus 600 bps at the bottom of the deal structure.

CVC Credit Partners previously priced the $519.25 million Apidos CLO XVII/Apidos CLO XVII LLC deal in March and the $733.6 million Apidos CLO XVIII/Apidos CLO XVIII LLC transaction in June.

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