CLO market quiet, primary activity ‘slowing’ in April; new issue spreads tighten

By Cristal Cody

Tupelo, Miss., April 7 – CLO primary market action remained quiet on Tuesday after the market ended March on a strong note with more than $31 billion of U.S. issuance year to date, according to market sources.

“We’re still pretty busy, but things are slowing down a little bit,” one source said.

CLO issuance is forecast to wane over the second quarter due to a lack of loan supply and impact from risk retention regulations.

Institutional loan issuance through March 27 was $53.9 billion, compared to about $129 billion in the first quarter of 2014, according to Wells Fargo Securities, LLC.

CLO spreads improve

New CLO AAA notes moved tighter over March to price in the Libor plus 143 basis points to Libor plus 155 bps area, depending on the manager, a source said.

Refinancing activity also increased in March, and more vintage CLO refinancings are anticipated over the year.

“Spreads are tightening across the structure,” a source said. “Any deals wider that are two years old are candidates. As triple As tighten, there will be more and more candidates.”

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