The surprisingly quick start to the U.S. CLO refinancing market for 2017 has finally migrated over to new deals as well.
In the past week, five new-issue collateralized loan obligations have been launched and/or priced by U.S. managers, after just one deal was arranged in the first two weeks of the year. The new deals are being placed by THL Credit Advisors, Sound Point Capital Partners, CIFC Management, Apex Credit Partners and Octagon Credit Investors.
This flurry of volume comes following period dominated by refinancing activity, with 22 CLOs refinanced or reset during January and early February, according to Thomson Reuters and reports.
MJX Partners’ Venture XXVI (priced on Jan. 19) and Apex’ upsized $454.3 million JFIN CLO 2017 priced Jan. 27 through Jefferies were the lone new deals for January, according to Thomson.
CIFC Funding 2017-1, the $500 million THL Credit Wind River 2017-1, Sound Point Capital CLO XXV ($664.3 million, upsized from $404 million) and the $611.5 million Octagon Investment Partners 30 have been launched as the first deals for February.
Of the six new CLOs marketed so far this year, four of the deals are over $600 million in size, with the largest being CIFC’s targeted portfolio of $814.3 million, according to a presale report by Standard & Poor’s. (S&P only assigned preliminary ratings to the triple-A $503.6 million tranche to be backed primarily by senior secured, first-lien loans).
The final tally of refis in January was $7.7 billion combined through 18 deals, according to Thomson Reuters. (The two additional deals for February totaled $705 million). Four deals have priced so far in February, including two on Friday, according to JPMorgan: GSO/Blackstone's $437 million Bowman Park CLO and Ares XXXII CLO from Ares CLO Management - also $437 million.
For priced CLOs, AAA spreads continued tightening in January, with the mid-month average spread of 145 compared to 146 in December. In February, the tightening has accelerated with three deals averaging 135 bps. (The narrowest spread belonging to Octagon Investment Partners 30 which priced Friday at 132 basis points over Libor, according to Thomson).
No European new-issue deals closed in January prior to February’s launch of Intermediate Capital Partners’ St. Paul’s CLO VII.
Activity in Europe has been more focused on refinancings, with three deals worth over €1 billion tallied in January, Thomson reported.
Thomson also reported Friday that assets under management with US CLOs slipped to $441 billion, while Euro CLOs fell to €68 billion.
More and more the market share of those deals are being almost completely held by post-crisis vintage CLOs, as older deals get paid off or refinanced. The “CLO 2.0” market share is now at 95%, up from 85% in January 2016. European 2.0 CLOs are about three-fourths of the market, sized at a total of €50 billion.
The average bid of U.S. CLO portfolios at year’s end edged higher to 98.28, a gain of 17 bps over the third quarter of last year. The median bid increased to 98.51, with 78% of U.S. CLOs having a weighted average bid on assets in the 97 to sub-100 area. By comparison, most Euro deals (63%) are in the 99-plus area.