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European CLOs spreads widen as new-issue market reopens

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Spreads on some of the first new-issue European CLOs to hit the market in 2019 are noticeably wider than the last deals of 2018.

So far this month, four new euro-denominated collateralized loan obligations have launched, according to rating agency presale reports, from Guggenheim Partners Europe, Carlyle Group's CELF Advisors LLP, Blackstone/GSO Management and Credit Suisse. The senior, triple A rated tranches of all four are being marketed with spreads of at least 100 basis points over three-month Euribor.

By comparison, the average spread on the triple A rated tranche of European CLOs issued in November was 98.75 basis points, according to Refinitiv. There were no new issues in December.

The spread widening mirrors the trend in the U.S. CLO market, where the senior tranches of new deals are at the widest levels in two years. CBAM CLO Management is marketing the senior tranche of its $600 million CBAM CLO 2019-9 at 128 basis points over Libor, according to Morningstar Credit Services. The deal has a standard, three-year reinvestment period.

Another U.S. deal launched this month, PGIM's $428.78 million Dryden 75, has a senior tranche that pays just 118 basis points over Libor, according to presale reports. While that is inside of the 121 basis-point spread average in December, the deal has an unusually short reinvestment period of just one year. Investors will generally agree to lower prices in return for shorter-duration deals.

In Europe, the tightest spread among new deals is Credit Suisse's €407.4 million Cadogan Square CLO XIII DAC (Designated Activity Company), at 100 basis points plus Euribor for its €246 million in Class A notes.

The €513 million Crosthwaite Park CLO DAC, the 19th European CLO managed by Blackstone/GSO, has a triple-A spread of 108 basis points for a €300 million tranche.

Just wide of Blackstone is the €409 million Carlyle Euro CLO 2019-1 DAC, with a spread of 110 basis points on a €240 million Class A-1 notes tranche. Meanwhile, Guggenheim's Bilbao CLO II DAC is to be priced at 114 basis points for Class A-1 notes totaling €240 million.

The four deals total €1.74 billion. By comparison, a total of €26.95 million of CLOs were issued in 2018, which was the highest level since the financial crisis. The all-time was €30 billion printed in 2007.

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