AXA Investment, Ares Management in deal pipeline; non-compliant paper wider in secondary

By Cristal Cody

Tupelo, Miss., July 24 – New primary action is expected in the U.S. and European markets, while secondary trading has been affected by the Volcker Rule, which went into effect earlier in the week, sources said on Friday.

AXA Investment Managers, Inc. is set to price a €362.3 million CLO deal, while Ares Management LLC is marketing an $813.6 million offering.

In the secondary market, non-Volcker compliant spread levels were about 15 basis points to 20 bps wider of compliant AAAs after trading in line in early spring, according to a Barclays Bank PLC report on Friday.

The regulations for banks to conform went into effect on Tuesday. The Volcker Rule prohibits banks from holding ownership interests in covered funds, such as hedge funds, private equity funds and CLOs that are commonly structured as 3(c)(7) funds.

“The CLO secondary market has been affected by the looming law in recent months, as non-compliant supply swamped the market,” Barclays analysts said in the note.

“Secondary market selling of non-compliant AAAs, which we define as non-“Volckerized” 1.0 and early 2.0 paper (2012 and 2013 vintage), increased significantly in the past few months, hitting its apex in June at more than $2 [billion].”

AXA to price €362.3 million

Coming up in the European deal market, AXA Investment Managers is expected to offer €362.3 million of notes due Oct. 15, 2029 in a private placement transaction, according to a market source.

The Adagio IV CLO Ltd. offering includes €200.5 million of class A1 senior secured floating-rate notes (Aaa//AAA); €5 million of class A2 senior secured fixed-rate notes (Aaa//AAA); €39.2 million of class B1 senior secured floating-rate notes (Aa2//AA); €7 million of class B2 senior secured fixed-rate notes (Aa2//AA); €18 million of class C deferrable mezzanine floating-rate notes (A2//A); €18.6 million of class D deferrable mezzanine floating-rate notes (Baa2//BBB); €25.2 million of class E deferrable junior floating-rate notes (Ba2//BB); €11.7 million of class F deferrable junior floating-rate notes (B2//B-) and €37.1 million of subordinated notes.

The CLO is backed primarily by senior secured loans and secured senior bonds.

Proceeds from the deal will be used to purchase a €350 million portfolio of mostly European leveraged loans and bonds.

The deal is expected to close on Sept. 8.

AXA Investment Managers was last in the primary market in April with the $414 million Allegro CLO III Ltd./Allegro CLO III LLC transaction.

The asset management firm, a subsidiary of Paris-based AXA Group, priced one CLO in 2014.

Ares offers $813.6 million CLO

Ares Management is in the U.S. pipeline with an $813.6 million offering of notes due July 29, 2026 in the Ares XXXIV CLO Ltd./Ares XXXIV CLO LLC deal, a market source said.

The transaction includes $495 million of class A senior floating-rate notes (Aaa/AAA/); $103.1 million of class B senior floating-rate notes (Aa1//); $63.9 million of class C mezzanine deferrable floating-rate notes (A2//); $42 million of class D mezzanine deferrable floating-rate notes (Baa3//); $11.5 million of class E-1 mezzanine deferrable floating-rate notes; $20.5 million of class E-2 mezzanine deferrable floating-rate notes; $11.9 million of class F mezzanine deferrable floating-rate notes and $65.7 million of subordinated notes.

Barclays Capital Inc. is the placement agent.

Ares CLO Management XXXIV, LP will manage the CLO.

The offering is backed primarily by broadly syndicated senior secured corporate loans.

The deal is expected to close on Aug. 27.

Ares Management previously brought to market the $613 million Ares XXXIII CLO Ltd./Ares XXXIII CLO LLC transaction on Feb. 3 and refinanced $612.4 million of notes in the Ares XXXIV CLO Ltd./Ares XXXIV CLO LLC vehicle on May 15.

The Los Angeles-based alternative asset management firm priced three CLOs 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.