New issue spreads wide compared to start of 2014; Mariner closes CLO, details new business

By Cristal Cody

Tupelo, Miss., Jan. 8 – CLO primary spreads remain wide compared to a year ago, according to Wells Fargo Securities, LLC.

“For full-year 2014, benchmark AAA spreads widened approximately 10 bps, from 150 bps in January 2014 to 160 bps in December 2014,” Wells Fargo Securities senior analyst Dave Preston and associate analyst Jason McNeilis said in a note.

“AA spreads widened 50 bps on the year, and single-A spreads moved wider approximately 40 bps,” the analysts said. “BBB and BB also moved wider, with the biggest move in BB spreads, which increased from 625 bps to 695 bps.”

AA notes priced on average at Libor plus 250 basis points, while A notes came at the Libor plus 350 bps area and BBB notes were brought in the Libor plus 460 bps area in December.

Mariner settles first CLO

Mariner Investment Group, LLC announced on Thursday that it closed on its first CLO deal, the $502 million Elm CLO 2014-1 Ltd./Elm CLO 2014-1 LLC transaction brought via BofA Merrill Lynch in December.

The firm saw “strong investor interest in this offering,” Mariner co-chief information officer Basil Williams said in a statement. “We believe that CLOs represent a compelling investment opportunity in a market where senior lending opportunities will continue to offer superior risk-adjusted returns, and the floating-rate nature of these products acts as an effective hedge if interest rates rise.”

Mariner Investment Group placed the notes due Jan. 17, 2023 in a AAA tranche at Libor plus 140 bps, according to a market source.

In November, the New York City-based alternative asset management firm launched a CLO business and hired a 13-person corporate credit team from majority interest partner ORIX USA Corp. to enhance Mariner’s “ability to capture what it believes is an ongoing opportunity in the CLO market,” the release said.

The new CLO business is co-led by David Martin and Erik Gunnerson, who had been co-heads of the leveraged loan and high-yield bond business at Dallas-based ORIX USA since 2009.

The ORIX USA team allows Mariner “to enter the market with a turnkey CLO business of the first order,” Bracebridge Young, Mariner’s chief executive officer, said in the release.

Proceeds from the deal were used to purchase assets to reach a target portfolio of about $500 million of mostly leveraged loans, a source said.

ORIX USA is a subsidiary of Tokyo-based ORIX Corp.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.