Och-Ziff, PGIM price CLOs; new issue spreads tighten; secondary spreads hold firm

By Cristal Cody

Tupelo, Miss., Feb. 5 – CLO issuance continues to pick up, while spreads are tightening in the primary market.

Year to date, $7.7 billion of broadly syndicated and middle-market CLOs have priced, according to a BofA Merrill Lynch research note released on Monday.

Details also emerged on two new transactions.

Och-Ziff Loan Management LP affiliate OZ CLO Management LLC priced a $509.2 million new CLO.

Prudential Investment Management, Inc.’s asset management business, PGIM, Inc., tapped the primary market with a $423.09 million CLO offering.

“With one month in the books for 2018, U.S. CLO issuance is strong, and senior spreads have tightened,” according to a Wells Fargo Securities LLC analyst note released on Monday. “January saw 10 U.S. CLOs price, for more than $6 billion in volume.”

New issue AAA CLO spreads have tightened about 8 basis points to 9 bps from the end of 2017, according to the note.

“BB spreads also posted new tights – new issue BB’s breached the 500-bp level, with a deal pricing at 495 bps – compared to 530 bps at year-end,” the Wells Fargo analysts said. “While AAA and BB spread tightening has garnered the most attention, we would argue AAA spreads are just catching up to the rest of the capital stack.”

Refinanced CLOs also are pricing tight, according to the BofA Merrill Lynch note.

In the “red-hot CLO new-issue and refi/reset markets, deals priced at close to or set new post-crisis tights at every tranche level from AAA-BB,” the BofA Merrill Lynch analysts said.

In addition, CLO secondary spreads are holding firm, ending Friday unchanged on the week, the BofA Merrill Lynch analysts said.

CLO AAA secondary spreads were flat at the Libor plus 93 bps area.

Secondary spreads tightened over the first month of the year by 7 bps at the AAA level, 10 bps for single A CLOs and 25 bps to 35 bps for BBB to B levels, according to the note.

Och-Ziff sells $509.2 million

OZ CLO Management sold $509.2 million of notes due Jan. 17, 2031 in a new CLO transaction, according to a market source.

OZLM XXII, Ltd./OZLM XXII, LLC priced $312 million of class A-1 floating-rate notes at Libor plus 107 bps at the top of the capital structure.

BofA Merrill Lynch was the placement agent.

Och-Ziff priced two new CLOs and refinanced five vintage CLOs in 2017.

The firm is an affiliate of New York City-based alternative asset management Och-Ziff Capital Management Group LLC.

PGIM brings Dryden 57 CLO

PGIM priced $423.09 million of notes due May 15, 2031 in the Dryden 57 CLO, Ltd./Dryden 57 CLO, LLC transaction, according to a market source.

The CLO sold the $269.75 million tranche of class A floating-rate notes at Libor plus 101 bps.

Deutsche Bank Securities Inc. was the placement agent.

PGIM, part of Newark, N.J.-based Prudential Investment Management, refinanced four vintage dollar-denominated CLOs in 2017.

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