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Published on 4/23/2015 in the Prospect News CLO Daily.

Spreads wide of last week in CLO primary; market eyes MJX Asset Management repricing

By Rebecca Melvin

New York, April 23 – The CLO primary market perked up by Thursday, with pricing obtained on two U.S.-based deals and with a third reported to have priced, while another deal priced in the euro market, sources said.

There was also at least one repricing by MJX Asset Management Venture CLO, a New York-based CLO analyst said.

The beginning of the week had been quiet with many managers and investors away from their desks to attend the fourth annual IMN Investors’ Conference on CLOs & Leveraged Loans in New York on Monday and Tuesday.

The new deals learned about Thursday included TPG Global LLC’s $515.25 million in the TICP-CLO IV Ltd./TICP CLO IV LLC, which represents TPG’s first CLO of the year and which priced late Wednesday.

NXT Capital CLO 2015-1 LLC priced $408,641,000 of notes due April 2027 in a CLO offering brought via underwriter Wells Fargo Securities LLC.

Kramer Van Kirk Credit Strategies LP was also said to have priced a CLO via underwriter Goldman Sachs & Co., but details on the deal could not be obtained by Prospect News’ deadline.

Internationally, Alcentra Ltd. priced a €450.75 million European CLO of notes due 2028, called Jubilee CLO 2015-XV BV.

Compared to spreads on deals priced earlier in the month, pricing appeared slightly wide, a New York-based market source said.

Last week, Shenkman, GSO and American Capital priced, and while it is difficult to make a generalization in the absence of the ability to compare line by line, it appears that pricing this week “looks slightly wide, but in the same Zip code,” the market source said.

“TPG is a little wider on the AAs at 220 bps,” the source said.

“The further down the cap stack the wider it goes,” he said.

As for the impact of repriced issues on the market, there will be a slight widening because the repriced issues are in high demand. But pricing is still tight in general, and there is relatively strong demand.”

“These are going to be well bid,” the market source said of CLOs in general.

Another refi

The impact of refinancings on the CLO primary market shouldn’t be dramatic, but there will be higher demand for the refinanced paper, which bears a higher coupon for shorter duration, and which also takes some uncertainty out of the equation since refinanced paper cannot be refinanced a second time, an analyst said.

“It makes sense for the equity-investor-base since it reduces the cost, and for debt-investors, refinancing takes care of Volcker Rule and other issues of that nature, the analyst said.

For the MJX refinancing seen Thursday the coupon on the AAA tranche was reduced to 130 bps from 145 bps, he said.

These deals will have limited activity, but there is a pocket of investors for whom the refinanced paper is attractive, he said.

So far there have been eight refinancings this year, he said. Thursday’s MJX refinance joins Venture 11, Symphony 10, among others.

If the original deal came in 2011 or 2012 and the original bond was for seven or eight years, then in 2015, the remaining time is about three years. “For many, locking in Libor plus 130 [bps] for three years is attractive. Plus you have the refi threat removed,” he said.


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