CLO refinancings to remain at ‘brisk pace’; tax changes positive for CLOs in near term

By Cristal Cody

Tupelo, Miss., Jan. 18 – CLO refinancing action is expected to remain strong in the near-term horizon.

“At this point, we expect CLO resets and refinancings to occur at the same brisk pace seen last year with much of the activity coming from 2015 and 2016 CLOs either just reaching or are nearing the end of their non-call periods,” Kevin Kendra, managing director and group head of Fitch Ratings, said in a news release on Thursday.

CLO managers refinanced a record $164 billion of vintage CLOs in 2017.

The mostly benign leveraged loan default environment and potential for improvement in credit metrics for corporate issuers also bodes well for the pace of new issue CLO deals, Fitch said.

While new issuance has gotten off to a slow start in 2018, CLO refinancing action has continued in January.

Coming up, Redding Ridge Asset Management, LLC plans to price $1,552,350,000 of notes in a refinancing and renaming of a vintage 2014 CLO that was first priced by Apollo Credit Management (CLO) LLC.

The CLO will be renamed RR 3 Ltd./RR 3 LLC from ALM XIV, Ltd., which was originally priced on June 6, 2014 and managed by Apollo Credit Management.

In other market activity, the new U.S. tax changes should have a positive effect on CLOs and leveraged loans, Wells Fargo Securities, LLC analysts said in a note on Thursday.

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