Crestline Denali on deck with new CLO offering; CLO spreads tighten in secondary market

By Cristal Cody

Tupelo, Miss., Jan. 22 – Deal action is starting to heat up in the CLO market after a quiet start to the year, according to market sources on Monday.

Crestline Denali Capital, LP is marketing $409.6 million of notes in the firm’s first CLO transaction of 2018.

Several deals are in the pipeline, including from CLO managers Credit Suisse Asset Management, LLC and Vibrant Credit Partners, LLC.

Refinancings remain the bulk of activity in the year so far, sources report.

In the securitized secondary market, CLO spreads have mostly tightened over the past few weeks, according to a BofA Merrill Lynch note released on Monday.

Since Dec. 1, “spreads for AAA CLOs and AAA CMBS are 5 [basis points] and 10 [bps] tighter,” the BofA Merrill Lynch analysts said. “For CLOs, we do not think spreads will necessarily widen into short-term weakness. Demand from investors is simply too strong right now.

“But we do think we could see a pause to the charge tighter in spreads, especially if technicals shift in favor of higher quality long duration sectors such as CMBS.”

Since the start of January, U.S. CLO AAA spreads in general have tightened 5 bps in the secondary market to the Libor plus 95 bps area, according to the note. CLO BBB tranches have firmed 30 bps and BB-rated notes have tightened 25 bps over the past two weeks.

Because spreads have leaked wider in the investment-grade and high-yield bond markets, “some spread softness in securitized products spreads is likely in the near term,” according to the note.

Denali plans deal

In the new CLO deal pipeline, Crestline Denali Capital plans to price $409.6 million of notes due 2030, according to a market source.

The Denali Capital CLO XVI, Ltd./Denali Capital CLO XVI LLC offering includes $256 million of class A floating-rate notes (//AAA); $48 million of class B floating-rate notes; $24 million of class C floating-rate notes; $22 million of class D floating-rate notes; $18 million of class E floating-rate notes and $41.6 million of subordinated notes.

BNP Paribas Securities Corp. is the placement agent.

Crestline Denali, an Oak Brook, Ill.-based asset management firm, priced one new CLO and refinanced one vintage CLO in 2017.

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