Onex taps market, prices A-1 notes at 153 bps spread; pressure on CLO spreads to tighten

By Rebecca Melvin

New York, April 21 – Pricing was obtained for Onex Credit Partners, LLC’s $764 million collateralized loan obligation, which represents the largest deal among a set of sizable offerings for April so far.

CLO issuance for April alone now stands well over $4 billion, with year-to-date issuance standing at more than $36 billion, and is tracking about 16% ahead of the same period of 2014, according to Prospect News data.

In fact, Deutsche Bank’s Bjarni Torfason said CLO issuance in the first quarter represented a record high. And while CLO issuance has been strong, loan issuance has been low as issuers of leveraged debt have opted for high-yield bonds.

Loan issuance picked up somewhat in March, but that was mainly driven by refinancing activity, Torfason noted in research published April 15.

As loan spreads tighten and without increased loan issuance, new CLO issuance will become increasingly difficult, Torfason wrote. “New deals are likely to get pushed further out and liabilities will need to tighten to sustain continued issuance,” he said.

Onex Credit Partners priced $764 million of notes due April 17, 2027 in the OCP CLO 2015-8 Ltd./OCP CLO 2015-8 Corp. transaction, according to a market source.

The CLO sold $472.5 million of class A-1 senior secured floating-rate notes at Libor plus 153 basis points in the senior tranche.

BofA Merrill Lynch arranged the transaction.

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