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Wells: 3Q U.S. CLO issuance tops year-ago levels

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Booming September CLO issuance allowed managers to top their new-deal output from third-quarter 2019, although year-to-date issuance is still down more than a third from a year ago.

According to structured finance research published Thursday by Wells Fargo, collateralized loan obligation managers sponsored $24.9 billion in deals between July and September, compared to $24.7 billion in loan-portfolio offerings from the third quarter of 2019. Deal count was up 33% from 3Q 2019.

The third-quarter total was boosted by an $11.3 billion U.S. CLO primary volume last month, which Wells stated was the most active month since April 2019. That contrasted with a moribund August total, which was the lowest monthly volume figure since January 2017 outside of the March/April 2020 market freeze at the outset of the coronavirus outbreak in the U.S.

Overall deal volume (estimated at $58 billion in a report issued by Deutsche Bank) remains 33% below 2019's pace, but the market has seen "strong" monthly volume averaging $7.8 billion since April, according to Wells.

Deutsche Bank's CLO issuance forecast is for new deal volume of between $65 billion and $75 billion, down from an original pre-COVID-19 forecast of $90 billion for 2020.

Secondary loan volume for U.S. CLOs was $11.9 billion, marking the lowest monthly total of the year, but Wells noted that figure was still higher than any single month recorded between 2015 and 2019 – “an indication of how much secondary activity has increased this year.”

Net loan issuance remains minimal, Wells added. Even with a 1.2% quarter-over-quarter increase in syndicated loan market outstanding balance, the loan market has grown by just 1.6% on the year, stated the Wells report (citing S&P LCD data).

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