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Reset of 2015-vintage Ares CLO ends post-holiday lull

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Ares Management’s closing Tuesday of a $410 million CLO reset was the first transaction in the collateralized loan obligation market in nearly a week.

According to JPMorgan research, Ares reset rates on the Ares XXXVIII CLO Ltd. through Bank of America Merrill Lynch to break a brief dry spell in the U.S. market in the days before the extended Presidents Day holiday weekend.

It was first closing since Angelo, Gordon & Co. completed its new-issue Northwoods Capital XVI transaction on Feb. 15 and only the second since the market had two deals close on Feb. 12: the $458 million Crown Point IV by Pretium Capital Management and the $510 million Palmer Square CLO 1018-1.

Ares XXXVIII, originally issued in 2015, was also the first refinancing or reset since Feb. 9, when Onex Credit Partners issued a reset of OCP CLO 2014-5 at an elevated AAA paper rate.

A presale report published by S&P Global Ratings on Feb. 13 noted that the$236 million Class A-1 replacement notes were expected to pay 100 basis points over Libor.

Before Ares’ closing, the U.S. market had $6 billion in 13 new-issue CLOs priced in February, and $14.7 billion in total deals year to date, according to JPMorgan. That is ahead of the 2017 pace of $8.1 billion through Feb 21.

The Ares deal closed as another CLO portfolio entered the pipeline: On Wednesday, S&P issued a presale report on the new $512 million MidOcean Credit CLO VIII, the first 2018 deal sponsored by MidOcean Credit Fund Management, a subsidiary of MidOcean Partners.

MidOcean is expected to pay Libor plus 115 basis points on the $285 million AAA tranche, the report stated. That rate would be at the high end for senior paper coupons on broadly syndicated new-issue CLOs this month, which have ranged from 88 to 115 basis points over Libor.

MidOcean’s first deal of 2018 is also issuing an unrated tranche of Class A-2 notes sized at $30 million, and Class B notes totaling $65 million and rated AA. Four classes of deferrable subordinate notes are also part of the capital stack.

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