Fair Oaks sells €263.9 million CLO; negative watch placements slow; high-grade notes gain

By Cristal Cody

Tupelo, Miss., May 20 – New issue volume is continuing to resume in the CLO markets, including euro-denominated supply.

Fair Oaks Capital Ltd. priced a €263.9 million broadly syndicated CLO.

More than €7 billion of euro-denominated CLOs have priced year to date with volume slowed since the Covid-19 pandemic was declared in March, according to market sources.

CLO negative watch rating announcements have thinned over the past week, according to a Wells Fargo Securities LLC report on Wednesday.

On Monday, Fitch Ratings downgraded three euro CLO tranches from two deals.

Since March, Fitch has downgraded seven euro CLO tranches from five deals, according to the Wells Fargo Securities report.

“No other major rating agency has downgraded a euro CLO,” Wells Fargo analysts said in the note. “No new U.S. or euro CLO tranches have been placed on watch negative by the major rating agencies in the past week.”

Since March, Fitch has put about 13% of euro CLO tranches it rates on rating watch negative, while S&P Global Ratings has placed less than 2% of euro CLO tranches it rates on watch negative and Moody’s has put around 5% of euro CLO tranches it rates on review for downgrade, the analysts note.

Fitch has put less than 2% of U.S. CLO tranches it rates on rating watch negative since March, according to the Wells Fargo report.

S&P has placed more than 9% of the U.S. CLO tranches it rates on watch negative, while Moody’s has put 18% of U.S. CLO tranches it rates on review for downgrade.

In secondary market activity, average prices for high-grade CBO/CDO/CLO issues climbed to 95.50 on Tuesday from 94 at the start of the week and 93.70 on Friday, according to Trace data.

Lower-rated paper softened to 67.50 in the prior session from 70.50 on Monday.

Trading volume on Tuesday rose to $500.95 million for high-grade paper from $484.92 million on Monday and to $179.05 million for lower-rated securities from $74.34 million in the previous session.

Fair Oaks brings II CLO

Fair Oaks Capital priced €263.9 million of notes due July 15, 2031 in the new CLO offering, according to market sources.

Fair Oaks Loan Funding II DAC sold €142.8 million of class A floating-rate notes at Euribor plus 190 basis points at the top of the capital stack.

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

The deal is backed primarily by broadly syndicated senior secured obligations.

Fair Oaks Capital is a London-based alternative asset manager.

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