Deal Scan: Napier Park to Issue its 1st CLO of 2017

CLO Debut: Napier Park is issuing its first collateralized loan obligation of the year, according to Fitch ratings. The $408.5 million Regatta Funding IX will have an approximately five-year reinvestment period and will be non-callable for two years.  The transaction is designed to comply with both European and U.S. risk retention guidelines. The collateral manager, Regatta Loan Management, is expected to retain subordinated notes in an amount sufficient to satisfy the minimum retention requirements per both jurisdictions’ guidelines. The retention method is expected to constitute an “eligible horizontal residual interest.” The collateral manager will act as originator for the purpose of satisfying European risk retention requirements. Fitch is only rating the senior tranche, which is expected to pay Libor plus 130 basis points. J.P. Morgan Securities LLC is the arranger and initial purchaser

162 CLO Refis and Counting … Moody's Investors Service expects CLO refinancing activity to remain strong in 2017, and that's a good thing, at least for holders of the most subordinate securities issued in these deals, who benefit from increased excess spreads. While investors in the senior notes must agree to lower interest rates in order to remain invested, at least the CLO manager is in a better position to keep paying this interest, particularly as so many loans in CLO portfolios are being refinanced themselves. Since Jan. 1, 2016, 162 CLOs have refinanced; most of the 127 CLOs that refinanced between Jan. 1 and April 14 of this year shaved between 10 and 30 basis points off spreads on their AAA rated notes. 

Refis launched Monday include Apidos CLO XVIII, Grosvenor Place CLO 2015-1 and Neuberger Berman CLO XIV. Incidentally, those last two were NOT taking advantage of an SEC no-action letter to avoid triggering risk retention. Grosvenor place was issued post December 2014, and so does not qualify; the Neuberger Berman deal was refinanced and extended, meaning it also does not qualify.

Wireless Wins: Moody’s also weighed in on T-Mobile’s big win in an Federal Communications Commission auction shifting airwaves from TV broadcasters to the cellular industry. The rating agency says this is credit positive for wireless tower securitizations sponsored by American Tower Corp., Crown Castle, and SBA Communications, because the spectrum sale will stimulate T-Mobile to spend more to upgrade or install new equipment at tower operators’ sites. These upgrades will increase revenue and cash flows available to the ABS bonds, Moody's says.