Bolstering 2024's record collateralized loan obligation (CLO) issuance, three major CLO managers are in the market with refinancings totaling more than $1.3 billion that are each expected to be issued at a lower spread, according to S&P Global Ratings.
The Loan Syndications and Trading Association anticipatespegged CLO issuance totaling more than $465 billion through end of November, topping the previous record of $428 billion in 2021. This year, refinancings totaled $76 billion, with CLO resets at $198 billion and CLO new issuance at $191 billion.
The CLO refis by BlackRock Capital Investment Advisors, Benefit Street Partners, and Symphony Alternative Asset Management are each expected to find lower spreads, according to S&P. Lingering high interest rates have ramped up investor demand for CLOs' floating-rate debt.
"A year ago, close to half of the market was scheduled to exit their reinvestment periods in 2024, and the high demand for floating-rate instruments, driven by a "higher-for-longer" interest rate environment, pushed investors toward CLOs," said Hugo Pereira, vice presidentvp of market analytics & investor strategy at the LSTA.
The $376 million BlackRock Maroon Bells CLO XI LLC, originally issued in September 2022, pools middle-market loans and is expected to be issued at a lower coupon and spread over three-month Libor than the original debt, according to S&P. Total leverage on the deal rests at 6.55 times, and Scotia Capital is acting as placement agent.
S&P notes that BlackRock Capital currently manages seven middle-market CLOs and has $17.1 billion in total CLO assets under management (AUM).
The other two transactions, instead, pool broadly syndicated loans (BSLs).
The $543.82 million Benefit Street Partners CLO XVI Ltd. refinances a deal originally issued in December 2018 and previously refinanced in December 2021. S&P listed Natixis Securities Americas as the placement agent.
BSP CLO Management currently manages 29 CLOs and has $25.1 billion in total CLO assets under management, according to S&P.
The $402.9 million Symphony CLO 40 Ltd., underwritten by Scotia Capital, seeks to refinance a November 2023 transaction, S&P says. The ratings agency notes that Symphony Alternative Asset Management merged with Nuveen Asset Management, under parent Teachers Insurance and Annuity Association of America, and the combined platform manages $17 billion in CLO assets.
All three deals aim to extend their non-call periods to December 2026 and reinvestment periods to January 2030.
