Madison Park CLO for $440 million seen pricing next week; CLOs eyed for corporate refi

By Rebecca Melvin

New York, April 29 – Credit Suisse Asset Management LLC plans to price the Madison Park Funding XVII Ltd./Madison Park Funding XVII CLO for $440 million in the early part of the May 4 week, a market source said.

Wells Fargo is the placement agent for the Madison Park XVII deal.

Also heard in the market is the $565.65 million OZLM XII, Ltd./OZLM XII, LLC CLO being priced by Och-Ziff Loan Management LLP as manager and with J.P. Morgan Securities LLC as placement agent.

Otherwise no new deals were heard in the CLO market. So far the month’s U.S. new issue tally includes Apollo Credit, Babson, Symphony, Zais, JFIN Revolver, Palmer Square, Jackson Mill, AMMC, NEXT Capital TICP CLO and Allegro, according to Prospect News data.

Even with lower new issuance volume forecast for this year, speculative-grade debt refinancing needs will likely be satisfied by CLO investment capacity and other investors, according to a special note by Moody’s Investors Service published Wednesday.

New CLO issuance is expected to decline this year because of the Dodd-Frank risk-retention rule and rising interest rates.

Still if its assumptions hold, the rating agency said new CLO issuance volume will be sufficient to meet a substantial portion of corporate refinancing needs through 2019.

CLOs can be used if issuers decide to switch to loan financing from bond financing. High-yield bond investors, hedge funds, loan funds and pension fund will continue to meet the bulk of corporate refinancing needs through 2019. Non-CLO investors held roughly 53% of institutional loans as of March 2015. But CLOs will also play a role and thus alleviate default pressure through 2017, Moody’s said.

CLOs will play a large role in reducing the corporate debt maturity peak through 2019 if the financial system remains stable. New CLOs will play a larger role than existing deals in meeting demand, especially after 2017, because most existing deals will no longer be reinvesting by the time maturities balloon to $235 billion in 2018 and $349 billion in 2019, according to Moody’s.

If issuance declines from its $124 billion peak in 2014 to about $85 billion in 2015, or a drop of 30%, and remains flat through 2019, the capacity of new and existing CLOs will still be enough to meet corporate refunding needs.

Even if there is a 20% decline this year and a further 10% decline each year thereafter, the volume should still be sufficient, Moody’s said.

“Although new regulations will likely curb CLO issuance somewhat beginning this year, new issue volumes will remain substantial,” the rating agency said in its report.

© 2015 Prospect News.
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