AXA prices $556.93 million CLO; Five Arrows, Alcentra offer euro CLOs; supply thins

By Cristal Cody

Tupelo, Miss., Oct. 22 – CLO spreads are improving on overall lighter-than-expected fall volume, while deal action remains steady in October.

AXA Investment Managers, Inc. priced a new $556.93 million CLO deal that closes at the end of the month.

In the European primary market, Five Arrows Managers LLP is offering a €412 million CLO, while Alcentra Ltd. is marketing a €411.1 million CLO.

U.S. deal volume year to date has surpassed $100 billion, BofA Merrill Lynch analysts said in a note released on Monday.

While equities sold off and high-yield spreads widened, the “loan market and CLO market have remained immune,” Wells Fargo Securities LLC analysts said in a note on Monday.

CLO BBB and BB spreads have tightened 10 basis points to 15 bps since the end of September, while AAA spreads have been roughly flat, the note said.

CLO BBB spreads have firmed to Libor plus 315 bps from the Libor plus 305 bps area, while BB spreads have tightened to the Libor plus 595 bps area from the 610 bps area in September.

“We think a relative lack of supply led to tighter spreads in loans and CLOs,” the Wells Fargo analysts said. “We believe that post-Labor Day CLO supply under-delivered, after investors were primed for heavy primary volume in September. It appears repeated summertime fears of heavy post-Labor Day CLO issuance may have spooked some issuers.”

The CLO primary market remains active with more than $5 billion of issuance month to date, but volume is lower than prior months with a trailing six-month average of $11.9 billion per month, according to the note.

“We have also heard that wider AAA spreads and fears of a clogged calendar have led issuers to push Q4 issuance to Q1 2019,” the Wells Fargo analysts said. “At this point, slower September and October supply leads us to adjust our U.S. primary issuance forecast to $135 billion from $150 billion. We also revise our euro CLO issuance forecast upward, from €25 billion to €30 billion.”

BofA Merrill Lynch projects U.S. volume to total $120 billion for the year.

The CLO secondary market “managed to stay immune from the volatility that continued to roil the broader market” last week, according to the BofA Merrill Lynch note.

BWIC volume totaled $469 million, with more than 50% from AAA and AA bonds, the analysts said.

“We did not see any signs that investors were offloading their bonds to shift to a more risk-off posture,” the BofA Merrill Lynch analysts said. “As has been the case for the past few months, shorter-WAL and higher-coupon paper were particularly well bid.”

CLO AAAs were flat on the week at Libor plus 112 bps on average, according to the note.

AXA prices Allegro CLO IX

AXA Investment Managers priced $556,925,000 of notes due October 2031 in a new CLO offering, according to market sources.

Allegro CLO IX, Ltd./Allegro CLO IX LLC sold $352 million of class A senior secured floating-rate notes at Libor plus 117 bps in the AAA-rated tranche.

Morgan Stanley & Co. LLC was the placement agent.

The deal is backed primarily by broadly syndicated first-lien senior secured loans.

Greenwich, Conn.-based AXA is an asset management firm and subsidiary of Paris-based AXA Group.

Alcentra to price euro CLO

Alcentra plans to price €411.1 million of notes due Jan. 15, 2032 in the new Jubilee CLO 2018-XXI BV transaction, according to a market source.

The deal includes €2 million of class X senior secured floating-rate notes (Aaa//AAA), €244 million of class A senior secured floating-rate notes (Aaa//AAA), €5 million of class B-1 senior secured floating-rate notes (Aa2//AA) and €37 million of class B-2 senior secured fixed-rate notes (Aa2//AA).

The CLO offering also includes €28 million of class C deferrable mezzanine floating-rate notes (A2//A), €24 million of class D deferrable mezzanine floating-rate notes (Baa3//BBB-); €21.9 million of class E deferrable junior floating-rate notes (Ba2//BB), €12 million of class F deferrable junior floating-rate notes (B2//B-) and €37.2 million of subordinated notes.

Morgan Stanley & Co. International plc is the placement agent.

The issue is backed primarily by senior secured loans and bonds.

Alcentra has priced one new euro-denominated CLO year to date.

The CLO manager sold two European CLOs in 2017.

Alcentra is a London-based global asset management firm and indirect subsidiary of BNY Alcentra Group Holding, Inc.

Five Arrows plans deal

Five Arrows Managers LLP intends to price a new €412 million CLO offering of notes due October 2031, according to a market source.

The Contego CLO VI DAC transaction is expected to include €1.5 million of class X senior secured floating-rate notes (Aaa); €248 million of class A senior secured floating-rate notes (Aaa); €10.5 million of class B-1 senior secured fixed-rate notes (Aa2); €29.5 million of class B-2 senior secured floating-rate notes (Aa2); €28 million of class C senior secured deferrable floating-rate notes (A2); €22 million of class D senior secured deferrable floating-rate notes (Baa3); €22 million of class E senior secured deferrable floating-rate notes (Ba2); €12 million of class F senior secured deferrable floating-rate notes (B2) and €38.5 million of subordinated notes.

Merrill Lynch International is the placement agent.

The transaction is backed by senior secured obligations.

The deal is expected to close on Dec. 3.

Five Arrows Managers is a London-based subsidiary of the Rothschild Group.

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