U.S. CLO issuance falls nearly by half in July to $7.9B

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The volume of new-issue CLOs in July nearly fell by nearly half from June’s output. But the $7.9 billion of collateralized loan obligations printed were still enough to keep the year-to-date volume at a level nearly double last year’s full-year total.

According to Thomson Reuters LPC’s,, year-to-date CLO volume has moved past $60 billion, an 89% surge over the same period a year ago. That volume does not include refinance and resets, which added up to $11 billion through 25 deals, and now total $111 billion in the first seven months of the year.

July's new issue total, which covering 13 deals was below that of the five previous months, including June’s $14.97 billion in new-deal activity. But prior to January, the market had only three other months since July 2015 that exceeded $8 billion.

Average CLO AAA discount margin coupons remained flat month-over-month at 125 basis points over Libor. The tightest spread for the month was 118 basis points over Libor, a mark shared by Ares Management’s $1.1 billion Ares 44 CLO, and Octagon Investment Partners 32, a $511.5 million portfolio through Octagon Credit Investors.

In Europe, €1.6 billion in new CLOs priced in July, taking YTD volume to €10 billion over 25 deals. That is in line with €9.7b in deals issued during same period last year. Euro managers have also undertaken €2.9 billion of combined refi/reset activity, while AAA margins were flat at 91 bps over the negative Euribor benchmark rate (-0.329% as of Friday).

Total assets under management are $459 billion in the U.S (78% of which is contained in deals since 2014) and €70 billion for Europe.

The top loan holdings in U.S. CLOs (a rundown not previously included in LPC’s monthly reports) shows Dell Inc. ($3.08 billion), Transdigm ($2.79 billion), First Data Corp. ($2.68 billion) and Asurion Corp. ($2.65 billion) having the largest concentrations in portfolios.

The price distribution of loans in CLO portfolios shows the majority (65%) have a weighted average secondary market bid from 98 to sub-100 basis points. Sixty-eight percent of loans in U.S. CLOs trade at par-plus levels, compared to 33% a year ago.

Citi is the lead new-issue U.S. CLO arranger after seven months, with $9.36 billion covering 14 deals for a 16% market share, following by Bank of America Merrill Lynch (nine deals, $6.54 billion) and Morgan Stanley (11 deals, $5.03 billion).

Barclays leads European deals this year with five arranged transactions totaling €2.05 billion.

The market continues to be fed by a large surge in leveraged loans this year, which has now exceeded $228 billion in new-money volume, and $772 billion in total loans including refis and resets. The total size of the loan outstandings market has now reached $928 billion.

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