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July CLO volume keeps new-deal YTD issuance on 2018's record pace

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A busy pricing period last week has propelled new issuance of collateralized loan obligations near the record-setting pace of 2018.

According to a Deutsche Bank report, 14 CLOs priced last week including 10 new-issue deals that have brought year-to-date volume to $73 billion – close to the $75 billion new-deal pace through July 22, 2018, that resulted in a full-year record tally of $129 billion in volume.

All of the new-issue deals were for portfolios of broadly syndicated corporate loans, sponsored by managers such as GoldenTree Asset Management, Bain Capital Credit, MJX Asset Management, Och-Ziff Loan Management, Triumph Capital Advisors, HPS and a slew of debut managers: WhiteBox Capital Management, DoubleLine Capital and Steel Creek Investment Management.

GoldenTree Loan Management U.S. CLO 5 priced at the tightest margin for $381 million AAA-rated notes among the new deals, at 130 basis points over three-month Libor. Deutsche reports that the rate is “in line with tights of recent weeks.”

Deutsche also reports that WhiteBox Capital Management – backed by Minneapolis-based hedge fund Whitebox Advisors – is the seventh debut issuer for 2019. As a first-time issuer, WhiteBox’s pricing margins were wider than more established managers, with the $400 million Whitebox CLO 1 priced at 141 basis points for its AAA-rated notes.

But those notes are also part of Whitebox’s unusual structure, in which the senior AAA tranche (with the highest credit enhancement level of 39.5%) represents only 11% of the capital stack. Most of the deal (59% of the notional value) is tied into the notes with preliminary AA ratings from S&P Global Ratings. The Class A-L ($249.3 million) and AN-B ($11.16 million) notes have a blended spread of 159 basis points.

Despite the lower rating, the A-L notes have equal, or pari passu, rank with the triple-A Class AN-A notes.

All of the deals priced last week have two-year noncall and five-year reinvestment periods.

Deutsche Bank’s report also noted July’s CLO refinancings totaled $4.7 billion, up from $3.54 billion in June, with Investcorp, Voya Alternative Asset Management and Ares Management were among those issuing replacement notes for existing deals.

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