New CLO AAAs soft; Brigade prices $509.2 million CLO; 3i brings $510.5 million of notes

By Cristal Cody

Tupelo, Miss., July 14 – New CLO AAA-rated notes have widened in recent pricing with new issues brought by Brigade Capital Management, LLC and 3i Debt Management U.S. LLC printing at the Libor plus 155 basis points area, according to market sources.

Brigade Capital Management returned to the primary market for the second time this year, this time with a $509.2 million CLO deal.

3i Debt Management U.S. priced a $510.5 million CLO, its second U.S. offering of the year.

July issuance has slowed, though activity is expected to remain steady through the second half of the year.

“CLO supply is set to slow until macro visibility improves and spreads stabilize,” J.P. Morgan Securities LLC analysts said in a market note. “Medium term, with $62.5 [billion] YTD supply we believe our $100-110 [billion] gross US CLO YE15 supply will be met.”

The CLO market was seen returning to normalcy this week after a virtual shutdown in early July after macroeconomic concerns including the Greek debt crisis stifled activity, Anthony Bakshi, a Barclays strategist focused on high-yield loans and CLOs, told Prospect News on Tuesday.

“In the past few days, the CLO market has seen renewed activity with deals pricing and appetite for BWICs returning,” Bakshi said. After a robust June, July is likely to see lower new issuance volume simply because the first half of the month was slow, he said, but things are returning to normal.

Loan supply has picked up and equity is an important factor, but in general appetite is back up. “We’ve gotten past the weekly, Sunday night wait-and-see what happens in Greece [scenario],” Bakshi said. Once Wednesday’s European Union Parliamentary vote is concluded, the issue will be largely in the rear view mirror.

While economic news and geopolitical happenings trickle into all kinds of markets, the normal operating environment for the CLO market is specifically focused on loans and CLOs themselves. The two broad issues CLO investors are watching most closely are the primary loan market and the regulatory environment, Bakshi said.

“The primary loan market continues to be an important issue, as it’s been a low year of issuance and that’s made its way into CLO decision-making,” Bakshi said.

As regards to regulations, “CLO investors are just looking at the smartest, most cost-effective way to go about risk retention,” he said.

Brigade prices $509.2 million

Brigade Capital Management priced a $509.2 million CLO offering of notes due July 15, 2028, according to a market source.

Battalion CLO IX Ltd./Battalion CLO IX LLC sold $322.5 million of class A senior secured floating-rate notes at Libor plus 155 bps in the senior tranche.

RBC Capital Markets, LLC arranged the offering.

Brigade Capital Management will manage the CLO.

The CLO has a two-year non-call period and a five-year reinvestment period.

The transaction is backed primarily by broadly syndicated first-lien senior secured corporate loans.

Proceeds from the deal will be used to purchase a portfolio of about $500 million of mostly senior secured leveraged loans.

Brigade Capital Management has priced two CLO deals year to date.

The New York City-based investment advisor firm brought four CLO deals in 2014.

3i Debt Management prices

3i Debt Management sold $510.5 million of notes due July 25, 2027 in the Jamestown CLO VII, Ltd. CLO transaction, a market source said.

The CLO priced $322.5 million of class A-1 senior secured floating-rate notes at Libor plus 155 bps at the top of the capital structure.

Credit Suisse Securities (USA) LLC was the placement agent.

3i Debt Management is the CLO manager.

The CLO has a two-year non-call period and a four-year reinvestment period.

The portfolio is made up primarily of broadly syndicated first-lien senior secured corporate loans.

Proceeds from the deal will be used to purchase a portfolio of about $500 million of mostly senior secured leveraged loans.

3i Debt Management is a New York City-based investment manager.

Rebecca Melvin contributed to this report

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