Zais, Bain pricing their next new-issue CLOs at wider spreads

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Was Black Friday extended to the broadly syndicated CLO market?

According to presale reports issued Monday, investors in the senior notes issued by a pair of collateralized loan obligations held out for some of the widest spreads on new AAA note offerings in months.

Zais Group, for instance, has an assumed AAA coupon of 135 basis points over Libor for the $240 million Class A-1 tranche of its $410.3 million Zais CLO 11 open-market portfolio, according to Fitch Ratings. That compares to the 120 basis point spread that Zais priced its $508.4 million Zais CLO 9 transaction in June, and 95 basis points for its $460.5 million Zais CLO 8 printed in February.

The spreads are pegged to three-month Libor, which is also continuing to escalate with a post-crisis high of 2.69% on Nov. 23.

Zais CLO 11, which includes participations in 189 loans from 176 speculative-grade corporate borrowers, has an expected reinvestment period of five years and cannot be called for two years.

Fitch on Monday also published a presale for the $510 million Bain Capital Credit CLO 2018-3, the third deal issued by Bain Capital Credit U.S. CLO Manager. The AAA notes have a spread of 123 basis points, up from after 96 basis points and 108 basis points over Libor in two deals earlier this year.

The higher rates were published after managers with deals rated in the past week saw spreads inside of 120 basis points: CIFC CLO Management II (at 119 basis points for CIFC Funding 2018-V), PGIM (116 basis points by Dryden 61 CL) and Carlyle CLO Management (117 basis points for Carlyle US CLO 2018-4).

Primary CLO deals priced at an average spread of 118 basis points in October, according to figures from Refinitiv.

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