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CLO primary spreads firm across capital structure, BBBs 20 bps better; March issuance strong
By Cristal Cody
Tupelo, Miss., March 20 – CLO spreads have tightened across the capital structure in March even as issuance climbed, according to market sources on Friday.
New 3.0 CLO AAAs are pricing 3 basis points tighter on average at Libor plus 150 bps, compared to a month ago, according to a Wells Fargo Securities, LLC report on Friday from senior analyst Dave Preston and associate analyst Jason McNeilis.
BBBs have tightened the most among the tranches, firming 20 bps on average since February to the Libor plus 420 bps area.
“Secondary supply continued to be elevated, with another week of heavy BWIC activity,” the Wells Fargo analysts said. “While lists were still generally well received, spreads had a softer tone (although highly regarded deals still priced well).”
New CLO AAA notes have priced from Libor plus 140 bps to Libor plus 177 bps over the year, according to data compiled by Prospect News.
In January, $5.2 billion of CLOs priced, while $9.4 billion of deals priced in February, Barclays Bank plc analysts said in a note on Friday.
Barclays said “new deals are pricing even faster in March, with 16 deals and $8.9 billion priced in the first two weeks of the month. It is still very early in the year, but this puts the year-to-date total at a solid $23.4 billion, or slightly ahead of $100 billion on an annualized basis.”
Barclays forecasts CLO issuance of $90 billion to 110 billion for the full year.
Deal pipeline
Looking ahead, CLO managers including H.I.G. WhiteHorse Capital, LLC and Mariner Investment Group, LLC are in the deal pipeline, according to market sources.
H.I.G. WhiteHorse Capital is offering $512.5 million of notes due 2027 in the WhiteHorse X Ltd./WhiteHorse X LLC transaction via BofA Merrill Lynch.
Mariner Investment Group plans to price $502 million of notes due April 20, 2023 in the Mariner CLO 2015-1 LLC deal. BofA Merrill Lynch is the placement agent.
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