Blackstone/GSO offers €558.05 million CLO; euro CLO spreads firm; U.S. secondary demand up

By Cristal Cody

Eureka Springs, Ark., April 26 – CLO primary action is expected to stay busier in the U.S. and European markets over the next month, sources said on Tuesday.

Blackstone/GSO Debt Funds Management Europe Ltd. intends to price €558.05 million of notes in a new euro-denominated CLO transaction this week.

Meanwhile, European CLO spreads have been trading tighter in the secondary market.

European 2.0 CLO AAAs were trading about 5 basis points better in the Euribor plus 150 bps area, Wells Fargo Securities LLC analysts said in a note on Tuesday.

BB-rated notes have tightened about 40 bps to Euribor pus 760 bps.

Last week, “several BB bonds traded at discount margins in the low/mid to mid/high 700s at the start of the week, but similar bonds were trading in the low 700s by the end of the week,” according to a BofA Merrill Lynch market note.

In the U.S. CLO secondary market, demand has picked up, Wells Fargo analysts said.

“Spreads have continued to move tighter on increased demand; on a month-over-month basis, the AA, BBB and BB tranches are 40-75 bps tighter,” the analysts said. “The single A tranche has lagged the rally, just 15 bps tighter on the month.”

Blackstone/GSO to price

Blackstone/GSO Debt Funds Management Europe is expected to price an upsized €558.05 million of notes in the Elm Park CLO Designated Activity Co. transaction, according to the company and a market source.

The deal includes €324.5 million of class A-1 floating-rate notes (/AAA); €60.5 million of class A-2 floating-rate notes (/AA); €42.5 million of class B floating-rate notes (/A); €26.25 million of class C floating-rate notes (/BBB); €33.5 million of class D floating-rate notes (/BB); €14 million of class E floating-rate notes (/B-) and €56.8 million of subordinated notes.

The transaction originally was sized in the €400 million area, according to a company report in March.

Deutsche Bank AG, London Branch is arranging the deal.

The notes are due April 15, 2030 and are non-callable until April 15, 2018.

The CLO is backed primarily by euro-denominated senior secured loans.

Dublin-based Blackstone/GSO Debt Funds Management Europe, a subsidiary of asset manager GSO Capital Partners LP, priced three euro-denominated CLO deals in 2015.

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