Fair Oaks Capital prices €354.1 million CLO; secondary dollar, euro CLO spreads firm

By Cristal Cody

Tupelo, Miss., Sept. 21 – CLO issuance remains active in September, while secondary supply is picking up.

In the euro-denominated primary market, Fair Oaks Capital Ltd. priced a €354.1 million broadly syndicated CLO.

Year to date, more than $51 billion of dollar-denominated broadly syndicated CLOs and over €13 billion of euro-denominated CLOs have priced, market sources report.

CLO spreads were steady in the primary market, while tightening in secondary trading over the past week, according to a BofA Securities, Inc. research note released on Monday.

Primary AAA spreads have reached Libor plus 127 basis points for structures with one-year non-call and three-year reinvestment periods for top tier managers, according to the report.

Over the past week, “we saw the first post-Covid 5/2 [five-year reinvestment period and two-year non-call period] BSL CLO price at 143 bps this week,” the analysts said. “The continued AAA tightening trend could likely spur further short-dated AAA supply from refinancing existing transactions.”

In the secondary market, CLO BBBs firmed 40 bps over the past week to a Libor plus 450 bps average, while BB tranches tightened 25 bps to a Libor plus 1,025 bps average.

AAAs headed out Friday 3 bps better on the week at a Libor plus 132 bps average.

CLO BWIC volume doubled over the past week to $1.55 billion, according to the BofA Securities report.

In the euro-denominated secondary market, AAA spreads firmed 5 bps to a Euribor plus 125 bps average over the past week.

Euro CLO BBBs firmed 10 bps to a Euribor plus 390 bps average, while BB tranches tightened 25 bps to Euribor plus 675 bps.

Elsewhere, leveraged loan funds saw $17.4 million in redemptions for the past week ended Wednesday, according to a Fitch Ratings report on Friday.

The total was a significant decline from $260 million of outflows in the prior week and the second smallest outflow this year behind $13.5 million in redemptions in the week ending Jan. 22, Fitch said.

Year-to-date net outflows remain at $19.3 billion

Fair Oaks Capital prints

Fair Oaks Capital priced €354.1 million of notes due Oct. 17, 2033 in the Fair Oaks Loan Funding III DAC CLO offering, according to a market source.

Fair Oaks Loan Funding III sold €213.5 million of the class A senior secured floating-rate notes at Euribor plus 125 bps.

Barclays was the placement agent.

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

Fair Oaks Capital has priced two new CLOs year to date.

The alternative asset manager is based in London.

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