Euro CLO volume picks up; Five Arrows prices €412 million CLO; BlackRock notes on tap

By Cristal Cody

Tupelo, Miss., Oct. 29 – The European CLO primary market continues to be active in October amid new issuance last week and other deals expected to price soon.

Five Arrows Managers LLP sold €412 million of notes in a new CLO transaction. The CLO manager priced the class A-2 floating-rate tranche of notes at Euribor plus 98 basis points.

Rockford Tower Capital Management, LLC was in the European primary market last week with the previously reported €407 million Rockford Tower Europe CLO 2018-1 DAC deal. Rockford priced its class A-1 floating-rate tranche at Euribor plus 103 bps.

BlackRock Investment Management (UK) Ltd. also intends to price a €411.25 million CLO in the manager’s third new offering year to date.

More than €23 billion of new issue euro-denominated CLOs have priced in 2018, according to market sources.

In the secondary market, European CLO trading volumes were relatively low last week, “though trading levels indicated widening spreads,” according to a BofA Merrill Lynch research note released on Monday.

“Strong demand for investment-grade tranches in previous weeks reversed, and selling of single A and BBB bonds caused spreads to widen by around 10-15 bps in this part of the capital structure,” the note said. “There was relatively little volume in the rest of the capital structure, though based on widening iTraxx and corporate bond spreads, CLO clearing spread levels likely moved wider across the capital structure.”

Single A and below European CLO returns have been positive through the end of September and have outperformed equivalently rated euro corporate bonds, according to the note.

Contego CLO VI prints

Five Arrows Managers priced €412 million of notes due 2031 in the CLO deal, according to a market source.

In the AAA-rated tranches, Contego CLO VI DAC sold €15 million of 1.51% class A-1 senior secured fixed-rate notes and €233 million of class A-2 senior secured floating-rate notes at Euribor plus 98 bps.

Merrill Lynch International was the placement agent.

The transaction is backed by senior secured obligations.

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

BlackRock to price CLO

BlackRock Investment Management (UK) plans to sell €411.25 million of notes due Oct. 15, 2031 in the BlackRock European CLO VII DAC transaction, according to market sources.

The deal includes €240 million of class A senior secured floating-rate notes (Aaa//AAA); €28 million of class B-1 senior secured floating-rate notes (Aa2//AA); €20 million of class B-2 senior secured fixed-rate notes (Aa2//AA); €7 million of class C-1 senior secured deferrable floating-rate notes (A2//A); €20 million of class C-2 senior secured deferrable floating-rate notes (A2//A); €23 million of class D senior secured deferrable floating-rate notes (Baa3//BBB-); €22 million of class E senior secured deferrable floating-rate notes (Ba2//BB); €12 million of class F senior secured deferrable floating-rate notes (B2//B-) and €39.25 million of subordinated notes.

Barclays is the placement agent.

The deal is backed primarily by euro-denominated broadly syndicated senior secured obligations.

BlackRock Investment Management (UK) has priced two new euro-denominated CLOs year to date.

The CLO manager previously was in the primary market on July 12 with the €412.1 million BlackRock European CLO VI DAC deal.

The investment management firm is a London-based subsidiary of BlackRock, Inc.

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