The unexpectedly strong pace of collateralized loan obligation issuance in April has prompted S&P Global Ratings to increase its forecast for the year as a whole.
A total of $10 billion in CLOs backed by either broadly syndicated corporate loans or loans to middle market companies were printed in April, making it the busiest month so far this year. S&P now expects full–year issuance to reach $75 billion, up from its previous forecast of $60 billion.
It's easy to see why: at $28 billion, issuance for the first four months of the year is already half of the rating agency's initial full-year forecast. To put that in context, S&P’s original forecast was in the middle of most of the $50 billion to $70 billion issuance predications published by banks and ratings firms last December.
Both Wells Fargo and Fitch Ratings were both at the upper end of that range; so far both are standing by their full-year forecasts of $70 billion.
The first quarter CLO new deal volume (which includes static pool deals, according to S&P) has doubled the $14 billion output from the same period in 2016.
S&P’s revised forecast now positions CLOs as the second-busiest asset class in structured finance, ahead of both commercial ($65 billion) and residential ($50 billion) mortgage backed securities.
April’s new-deal tally included two deals exceeding $1 billion in size: Antares Capital Partners’ $2.1 billion Antares 2017-1 transaction (the largest post-crisis CLO, upsized after launch) and the $1.029 million Catskill Park CLO managed by GSO/Blackstone Debt Funds Management. Catskill Park’s ‘AAA’ discount margin of 118 basis points ties for the tightest spread of any CLO issued this year, according to S&P.
