BlueMountain prices $424 million CLO; Regatta sells $411 million; mezzanine spreads rally

By Cristal Cody

Eureka Springs, Ark., April 18 – CLO primary action remains light in the U.S. market with two new deals brought so far in April, according to market sources on Monday.

BlueMountain Capital Management LLC priced $424 million of notes in a new CLO transaction.

Regatta Loan Management LLC tapped the primary market with a $411 million deal.

“The US CLO market has had a quiet start to the new quarter with only two deals pricing in all of April,” J.P. Morgan Securities LLC analysts said in a note. “U.S. weekly issuance is averaging a pace of $0.57 [billion] per week in 2016.”

In the secondary market, BWIC volumes were up by more than 50% to $873 million over the previous week, according to a BofA Merrill Lynch note.

“Activity was heavily concentrated in CLO 2.0 AAAs and BBs which together accounted for over two-thirds of total volumes,” BofA Merrill Lynch analysts said. “Mezzanine CLO tranches have rallied, albeit with a lag, in tandem with the rally in broader risk assets.”

AAA CLO spreads tightened by 5 basis points to Libor plus 155 bps, while BBB, BB and B spreads came in 25 bps over the past week.

BBB-rated spreads were seen at Libor plus 550 bps, BB spreads tightened to Libor plus 925 bps, and single B spreads traded at Libor plus 1,400 bps.

In Europe, secondary trading over the past week was focused on mezzanine tranches and equity with BWIC volumes low at €27 million, according to BofA Merrill Lynch.

“Spreads tightened notably for 2.0 mezzanine, with BBB bonds generally trading in the mid-400s, in from the high 400s the previous week,” the analysts said. “BB bonds generally traded in the low/mid 700s, in from the mid-700s the previous week.”

BlueMountain taps market

BlueMountain Capital Management priced $424 million of notes due April 20, 2027 in the BlueMountain CLO 2016-1 Ltd./BlueMountain CLO 2016-1 LLC transaction, according to a market source.

The CLO sold $263.5 million of class A senior secured floating-rate notes (Aaa/AAA) at Libor plus 158 bps in the senior tranche.

J.P. Morgan Securities LLC was the placement agent.

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

BlueMountain Capital Management was in the primary market in 2015 with four U.S. CLO deals.

The management firm is based in New York City.

Regatta prices CLO

Regatta Loan Management priced $411 million of notes due July 12, 2028 in a new U.S. and European risk retention-compliant CLO offering, according to a market source.

Regatta VI Funding Ltd./Regatta VI Funding LLC sold $252 million of class A floating-rate notes at Libor plus 169 bps at the top of the capital structure.

Morgan Stanley & Co. LLC was the placement agent.

The CLO is backed primarily by first-lien senior secured loans.

Proceeds from the offering will be used to purchase a portfolio of about $400 million of mostly senior secured leveraged loans.

Regatta Loan Management is an investment firm based in New York City.

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