Onex taps market, prices A-1 notes at 153 bps spread; pressure on CLO spreads to tighten

By Rebecca Melvin

New York, April 21 – Pricing was obtained for Onex Credit Partners, LLC’s $764 million collateralized loan obligation, which represents the largest deal among a set of sizable offerings for April so far.

CLO issuance for April alone now stands well over $4 billion, with year-to-date issuance standing at more than $36 billion, and is tracking about 16% ahead of the same period of 2014, according to Prospect News data.

In fact, Deutsche Bank’s Bjarni Torfason said CLO issuance in the first quarter represented a record high. And while CLO issuance has been strong, loan issuance has been low as issuers of leveraged debt have opted for high-yield bonds.

Loan issuance picked up somewhat in March, but that was mainly driven by refinancing activity, Torfason noted in research published April 15.

As loan spreads tighten and without increased loan issuance, new CLO issuance will become increasingly difficult, Torfason wrote. “New deals are likely to get pushed further out and liabilities will need to tighten to sustain continued issuance,” he said.

Meanwhile, the pressure on CLO spreads to tighten will only increase as the potential for a rise in short-term interest rates grows.

Wells Fargo analysts Dave Preston and Jason McNeilis have also chronicled lower loan issuance, which they say is down by more than 50% year to date compared to 2014.

The drop is stark given the busy CLO primary market, which is up 10% year to date from a record-breaking 2014, Preston and McNeilis said.

In other news, the Securities Industry and Financial Markets Association has responded to a proposal to expand trade reporting and compliance engine (Trace) data to CLOs, CMBS and CMOs, according to a Wells Fargo note.

Sifma requested that the dissemination threshold be lowered to $100,000 from $1 million to insure that only true retail trades are subject to real time dissemination and increase the threshold for how often a Cusip appears in one periodic report to 20 from five.

Onex prices CLO

Onex Credit Partners priced $764 million of notes due April 17, 2027 in the OCP CLO 2015-8 Ltd./OCP CLO 2015-8 Corp. transaction, according to a market source.

The CLO sold $472.5 million of class A-1 senior secured floating-rate notes at Libor plus 153 basis points in the senior tranche.

BofA Merrill Lynch arranged the transaction.

Onex will manage the CLO.

The CLO is non-callable for a two-year period. The reinvestment period ends in April 2019.

The offering is backed primarily by a revolving pool of broadly syndicated senior secured loans.

Toronto-based Onex Credit Partners is the credit investing arm of Onex Corp., which priced three CLO transactions in 2014.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.