Over $10 billion of U.S. collateralized loan obligations priced in November, bringing issuance for the first nine months of the year to record $115.4 billion, according to Thomson Reuters.
Issuance was already at a record level at the end of October; the industry is expected to print another $10 billion or so in December, bringing the full-year total to around $125 billion.
Deals marketed since the beginning of the December include BlueMountain Capital Management’s $374.9 million BlueMountain CLO 2014-4, arranged by JPMorgan Securities. There is also a pair of CLOs sponsored by Oaktree Capital Management: the $410 million Oaktree EIF II Series A2. and the ¥35.75 billion Repackaged CLO Series OT-A2, which functions as a balance guaranty currency swap in connection with a portion of the senior notes of Oaktree EIF II Series A2. Mitsubishi UFJ Securities was the lead placement agent for both. All three deals are rated by Standard & Poor’s.
The increase in CLO assets contrasted sharply with mutual funds and exchange traded funds, which are also important buyers of leveraged loans. Investors withdrew a net $1.7 billion in November, though this was down sharply from the $4.8 billion withdrawn in October. In the first 11 months of the year, these funds saw $16.1 billion walk out the door.
As a result, loan funds’ share of loan market dropped to 17% in November from the year’s high of 23% in February and 22% end of December 2013. CLOs’ share has increased to 44% in November from recent low of 41% in March, though that was down from 48% in March 2013.
After climbing in the early half of the year, the average size of broadly syndicated loans has declined in recent months, averaging $493 million in November.
Spreads on the triple-A tranches of CLOs were relatively unchanged in November, averaging 152 basis points.
European CLO issuance amounted to 3.65 billion in November, bringing year-to-date volume to 16.5 billion
U.S. CLOs aggregate principal balance is now at $365 billion, European CLOs are at 68 billion euros (based on a universe of 865 U.S. CLOs and 240 European CLOs).
Nearly two thirds, or 71%, of U.S. CLO assets are held in CLOs that are still in their stated reinvestment period. For European CLOs, it’s the opposite, with the majority (63%) of assets held in CLOs past their reinvestment period.