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CLO issuance (including refis) tops $200 billion year to date

The pricing last week of two new CLOs and two refinancings from Anchorage Capital Group, Gallatin Loan Management and Benefit Street Partners and Neuberger Berman Investment Advisors has pushed the year-to-date volume of collateralized loan obligations beyond the $200 billion mark.

Meanwhile, European investment in CLOs jumped with three new and refinanced deals pricing last week, bringing that market to more than triple its output from the same period a year ago.

Last Thursday, Anchorage closed on a reset of the $550 million Anchorage Capital CLO 2013-1 through Citigroup, and Gallatin placed a $606 million Gallatin CLO VIII 2017-1 portfolio via Morgan Stanley, according to research published by JPMorgan.

The deals came one day after Neuberger’s reset of Neuberger Berman CLO XV (sized at $380 million) in a deal arranged by Bank of America Merrill Lynch and a new $713 million Benefit Street Partners CLO XII, also through BAML.

Year-to-date, according to JPMorgan, the volume of U.S. deals totals $200.7 billion in 412 deals, including $78.6 billion in primary issuance and $122 billion in refinancings and resets.

The compares to 115 deals at the same period a year ago totaling $48.9 billion in refis/resets/new issue.

Last week, Tikehau Capital Europe (a 13-year-old firm with €10.3 billion in assets) priced its €435 million Tikehau CLO III with Citigroup; Copenhangen-based Accunia Fondsmæglerselskab placed its €387 million Accunia European CLO II deal through Deutsche Bank; and PGIM completed a reset of Dryden 39 Euro CLO 2015, totaling €511 million.

European CLO managers have now issued or refinanced €31.4 billion in 86 Euro-denominated deals this year, compared to 26 totaling €10.6 billion last year through late September.

Exposure to Toys R Us is limited

Last week’s bankruptcy filing by Toys R Us exposes CLOs with up to $405 million in potential loan defaults, or about 10 basis points of total CLO asset holdings.

According to a Wells Fargo structured products research issued earlier this month, Toys R Us was among the top 15 in retail-sector loan holdings of U.S. post-crisis CLOs, ranging from $393 million in CLO deals rated by S&P Global Ratings, and up to $405 million for deals rated by Moody’s Investors Service.

ASR092017-toys
Signage is displayed outside a Toys R Us Inc. retail store in Louisville, Kentucky, U.S., on Monday, Sept. 18, 2017. Toys R Us Inc., which has struggled to lift its fortunes since a buyout loaded the retailer with debt more than a decade ago, is preparing a bankruptcy filing as soon as today, according to people familiar with the situation. Photographer: Luke Sharrett/Bloomberg
Luke Sharrett/Bloomberg

According to Fitch the deals are held in 37 CLOs.

Fitch Ratings, which covers a narrower universe of CLO deals, reported Toys filing was the sixth institutional loan retail default since April and the second-largest behind J. Crew Group Inc. $566.6 million distressed debt exchange in July.

Both Fitch and S&P report that the bankruptcy could push the corporate default rate past 10% by year's end.

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