THL prices; Ares offers $707 million CLO; Fortress in deal pipeline; mezzanine notes soft

By Cristal Cody

Tupelo, Miss., Sept. 28 – The CLO primary market is showing signs of activity, though volume is expected to stay light in the near term, according to market sources on Monday.

THL Credit Advisors LLC tapped the primary market with a $455.56 million CLO deal.

In other primary action, Jefferies Finance LLC sold $409.5 million of notes due Oct. 17, 2026 in the JFIN CLO 2015-II Ltd./JFIN CLO 2015-II LLC offering via Jefferies LLC. The AAA-rated tranche of notes priced at Libor plus 155 basis points, according to a market source. Apex Credit Partners LLC, a subsidiary of Jefferies Finance, will manage the CLO. Final pricing details were not available by press time.

In the European primary market, KKR Credit Advisors (Ireland) priced €516.8 million of notes in the Avoca CLO XV Ltd. deal via Barclays Bank plc. The AAA-rated tranche priced at Euribor plus 135 bps, a market source said. Final pricing details were not immediately available. The Dublin-based credit investment firm has priced two euro-denominated CLOs year to date.

Pricing action is expected to be fairly quiet over the remainder of the month, according to market sources.

“We continue to expect slow issuance near term as equity economics/demand is challenged and sentiment is weaker post-FOMC,” J.P. Morgan Securities LLC analysts said in a note. “With new issue warehouses attempting to minimize/avoid sectors such as energy/metals/etc., depending on the price tiering, it could be challenging to make the economics work and as CLO liabilities soften.”

Coming up in new deal action, Ares Management LLC intends to price a $707 million CLO.

Also in the pipeline, Fortress Investment Group LLC plans to bring a $409 million offering.

BB, B notes soft

In the secondary market, nearly $800 million of U.S. supply concentrated in AAA-rated notes was seen over the previous week, according to BofA Merrill Lynch analysts.

“Bidding activity was somewhat muted and we saw a repeat of some of the same themes from the last few weeks, where AAA notes continued to hold up and mezz trading stayed thin,” the analysts said in a note.

A- and AA-rated notes eased about 5 bps in secondary trading over the past week, while BB and B CLO notes widened 35 bps to 25 bps, BofA Merrill Lynch said.

About €170 million of European CLO bonds were on BWIC lists in the previous week with spreads mostly weaker, the note said.

THL prices $455.56 million

In the primary market, THL Credit Advisors sold $455.56 million of notes in the firm’s second CLO transaction of the year, according to a market source.

THL Credit Wind River 2015-2 CLO Ltd./THL Credit Wind River 2015-2 LLC priced $230.4 million of class A-1 floating-rate notes at Libor plus 155 bps at the top of the capital structure.

Deutsche Bank Securities Inc. arranged the deal.

THL Credit Senior Loan Strategies LLC will manage the CLO.

THL Credit Advisors previously priced the $616.25 million THL Credit Wind River 2015-1 CLO Ltd./THL Credit Wind River 2015-1 LLC deal on June 10.

The Boston-based alternative credit investment firm brought three CLO transactions in 2014.

Ares offers $707 million CLO

Looking ahead to new issuance, Ares Management intends to price a $707 million CLO offering, according to a market source.

The Ares XXXVII CLO, Ltd./Ares XXXVII CLO, LLC deal includes $433.3 million of class A-1 floating-rate notes (/AAA); $45.2 million of class A-2 floating-rate notes; $50 million of class A-2 floating-rate loans; $45.5 million of class B floating-rate notes; $37.1 million of class C deferrable floating-rate notes; $34.3 million of class D deferrable floating-rate notes; $12.6 million of class E deferrable floating-rate notes and $49 million of subordinated notes.

Goldman Sachs & Co. is the placement agent.

Ares CLO Management XXXVII LP will manage the CLO.

The notes are due Oct. 15, 2026.

The CLO is non-callable until Oct. 15, 2017. The reinvestment period ends Oct. 15, 2019.

The deal is backed primarily by broadly syndicated senior secured corporate loans.

Ares Management has brought three CLO transactions and refinanced one vintage CLO vehicle year to date.

The Los Angeles-based alternative asset management firm priced three CLO deals in 2014.

Fortress Investment plans deal

Fortress Investment Group plans to sell $409 million of notes due Oct. 28, 2026 in the Fortress Credit BSL III Ltd./Fortress Credit BSL III LLC transaction, according to a market source.

The deal includes $249.5 million of class A floating-rate notes (Aaa/AAA); $25 million of class B-1 floating-rate notes (/AA); $20 million of class B-2 fixed-rate notes (/AA); $35 million of class C deferrable floating-rate notes (/A); $22 million of class D deferrable floating-rate notes (/BBB); $15.5 million of class E deferrable floating-rate notes (/BB) and $42 million of subordinated notes.

Mitsubishi UFJ Securities (USA) Inc. is the deal arranger.

The CLO manager is FC BSL III CM LLC, which will enter into a services agreement with Drawbridge Special Opportunities Advisors LLC, a subsidiary of Fortress Credit affiliate FIG LLC.

The CLO has a non-call period that ends Oct. 18, 2017. The reinvestment period is set to end Oct. 18. 2019.

The deal is backed primarily by broadly syndicated senior secured corporate loans.

Fortress Investment has priced two CLO transactions and refinanced two vintage 2012 deals year to date.

The New York City-based investment firm brought to market two CLOs in 2014.

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