Issuance in the CLO market picked up in the days leading up to the Thanksgiving holiday, with Guggenheim Investment Management, Apollo Global Management, GSO/Blackstone Debt Funds Management and Lyon Capital Management pricing CLOs totaling $1.7 billion.

GSO/Blackstone and Oak Hill Advisors also began arranging two new CLOs totaling $805 million, keeping the CLO queue moving.

Indeed, deals like these helped push the year-to-date global supply of CLOs to $4.9 billion, according to a report from JPMorgan Securities. “We forecasted a $5 billion gross global CLO supply for 2010,” JPMorgan analysts Rishad Ahluwalia and Maggie Wang wrote in the report. “That goal has been achieved.”

Guggenheim priced a $600 million cash-flow CLO arranged by Citigroup. The NZCG Funding CLO, which was arranged in September, includes a $342 million triple-A-rated tranche priced at Libor plus 175 basis points.

The vehicle also includes a $90 million single-B-rated tranche and a $165.6 million equity tranche, which Guggenheim will hold. The CLO matures in November 2022 and has a reinvestment period that runs until Nov. 25, 2014, according to Standard & Poor’s.

Leon Black’s Apollo priced a $400 million CLO — ALM Loan Funding 2010-3—arranged by JPMorgan. That CLO consists of a $262 million tranche of triple-A notes priced at Libor plus 170, with an OID of 99.77; a $20.5 million tranche of double-A notes priced at Libor plus 250 basis points, with an OID of 97.36; a $25.75 million tranche of single-A notes priced at Libor plus 300 basis points, with an OID of 94.86; a $14 million tranche of triple-B notes priced at Libor plus 400, with an OID of 90.04; a $10 million tranche of double-B notes priced at Libor plus 600 basis points, with an OID of 93.98; and an equity tranche that will be held by an Apollo affiliate. The vehicle matures in November 2020 and has a two-year reinvestment period.

Meanwhile, GSO/Blackstone priced the $400 million Morningside Park CLO Ltd. That CLO includes a $265 million triple-A tranche, a $22 million tranche of class B notes, a $38 million tranche of class C notes, a $17 million tranche of class D notes, a $4 million tranche of class E notes and $54 million in subordinated notes. Ratings for these tranches are expected over the next few months, according to sources.

The Morningside CLO has a two-year reinvestment period for all asset sales, repayments and prepayments, and the portfolio will be actively managed, according to Fitch Ratings.

The rating agency said that the indicative portfolio’s weighted average rating is ‘B’/'B-’, which shows relatively weak credit quality.

However, the agency said that the triple-A tranche rating will not be negatively affected by foreseeable levels of defaults.

The CLO will consist of 95.5% senior secured loans and 4.5% second-lien and unsecured loans, Fitch said. Approximately 84.2% of the loans are classified as having strong recovery prospects.

And Lyon Capital Management priced its $300 million LCM VIII CLO, with a triple-A tranche at Libor plus 160 basis points, a double-A tranche at Libor plus 225 basis points, a single-A tranche at Libor plus 300 basis points and a triple-B tranche at Libor plus 500 basis points. The size of each tranche couldn’t be determined.

Sunny Supply Forecast

GSO/Blackstone and Oak Hill Advisors, meanwhile, are raising $805.5 million for two new CLOs, according to sources — a $400 million CLO for GSO/Blackstone, and a $405.5 million CLO for Oak Hill. Both vehicles should price by the end of the year, sources said.

Earlier this year, Apollo priced the $325 million ALM Loan Funding 2010-1 LTD CLO, which was arranged by Citigroup. That vehicle consists of a $215 million tranche of triple-A loans that priced at Libor plus 170 basis points; an $11.1 million tranche of double-A loans that priced at Libor plus 225 basis points, with a discount of 96.11; a $24.7 million tranche of single-A loans that priced Libor plus 230 basis points, with a discount of 91.44; and a $72 million equity tranche.

The action on the market stems from secondary CLO prices that have remained level or risen slightly since the beginning of November, which has helped improve the overall tone in the market, according to sources.

The JPMorgan analysts were feeling so jolly that they even decided to raise their 2011 and 2012 CLO supply estimates to $12.5 billion from $10 billion and $25 billion from $20 billion, respectively.

They also forecasted that the spreads on triple-A-rated tranches will tighten by 50 basis points to a range from 100 basis points to 125 basis points by the end of 2011.

“We believe primary transactions offer compelling relative value,” the analysts wrote. “Credit performance is improving and the combination of high current coupons and structural changes (lower leverage, higher subordinations) should appeal to real money and bank investors seeking carry.”

This pickup in supply, though, is a “pyrrhic victory,” they added. Like many other products, they said, CLO supply will almost certainly be net negative, with gross new issue volume still lower than peak volume.

“Based on our revised supply forecasts and likely pay downs, we expect the outstanding global CLO market will decline by about $57 billion to approximately $337 billion by 2013,” analysts said.

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