The $2.8 billion in CLOs that have priced this month is not enough to reverse the sluggish 2016 CLO market, which is down over 50% in both deal count and dollar volume compared to mid-2015.
But six deals to date in June are pacing toward a third straight month of collateralized loan obligation deal volume topping $5 billion.
Following the pricing on Monday of $1.1 billion in new collateralized loan obligations by Apollo Credit Management (ALM XVIII) and GSO/Blackstone (Westcott Park), the six June deals are on track to match the 12 CLO deals completed in May. June could also top May’s $5.4 billion in dollar volume if deal sizes remain constant, and approach the 2016 high-water mark of $5.9 billion in CLO deals issued in April.
But merely keeping up with the activity in recent months would not be enough to approach the various $65-90 billion CLO issuance levels forecast by bank analysts at the beginning of the year. Through Monday deals have totaled only $22.9 billion on 55 transactions, compared to $61.3 billion and 120 deals at this time a year ago, according to JPMorgan.
The final tally for 2015 was $97.4 billion, which was down from the record $124 billion issuance level in 2014. A slowing senior loan market has been attributed in part to regulators’ leveraged lending guidance that has discouraged major banks from participating in high-leverage broadly syndicated loans.
The smaller European market, which was at a virtual standstill in the first two months of the year before a spring resurgence, has seen one deal completed in June: the €410 million Babson Euro CLO 2016-1 from Babson Capital Management.
Year-to-date Euro CLO deals total €5.6 billion in 14 transactions, close to the 18 Euro CLOs sized at €7.1 billion at the same time last year.
The pair of U.S. CLO deals pricing Monday – which included Apollo’s first CLO for 2016 – joined a list of four new CLOs completed in June that included TCI Capital Management’s Flatiron 2016-1 ($409 million), Teachers Advisors’ TIAA CLO 1 ($456 million), Voya Alternative Asset Management’s Voya CLO 2016-2 ($407 million), and TPG Institutional Credit Partners’ TICP CLO V 2016-1 ($410 million).
Based on published presale reports this month, two additional U.S. deals are in the market awaiting closing: PineBridge Investment’s $400 million Galaxy XXII CLO and Ocean Trails CLO VI, sized at $305.5 million from West Gate Horizons Advisors.
In its report issued Tuesday, JPMorgan noted the signs of increased loan activity, which could feed the pipeline for new CLO deals in the coming months. Approximately $12.3 billion in institutional loans priced last week, and $7.4 billion has already been repriced this month following a 12-month high of $10.6 billion in repricings in May.
Loan volume is down 32% year-over-year at $114.1 billion (compared to $168.5 billion at the same point in 2015).