Columbia Management, CSAM price upsized CLOs; August primary thin; secondary volume rises

By Cristal Cody

Tupelo, Miss., Aug. 17 – New August CLO issuance includes deals from Columbia Management Investment Advisors, LLC and Credit Suisse Asset Management, LLC, while overall volume remains light for the month, according to market sources on Monday.

Columbia Management Investment Advisors sold an upsized $709.8 million of notes in its second CLO offering of the year.

Credit Suisse Asset Management brought a $775 million deal, upsized from $620 million. The Madison Park Funding XVIII Ltd./Madison Park Funding XVIII LLC offering priced via Morgan Stanley & Co. LLC. Final pricing details were not available by press time.

“The CLO market has seen just five deals price month to date, for a total of $2.9 billion,” Wells Fargo Securities, LLC senior analyst Dave Preston and associate analyst Mackenzie Miller said in a note on Monday. “Loan supply has been limited relative to CLO formation (the overall loan market has grown by just 0.4% year to date), leaving CLO managers to ramp portfolios amid light loan supply. Retail outflows over the past few weeks, which have pressured loan prices, may help CLO issuance.”

In the secondary market, trading was choppy over the previous week from volatility over the devaluation of the yuan, with $350 million of BWIC volume, according to BofA Merrill Lynch analysts.

“Investment-grade levels held firm overall while junior mezz spreads leaked wider,” the analysts said in a note. “The small number of equity line items all ended up not trading. We expect the ongoing weakness in commodities to continue to impact trading in the CLO market especially toward the bottom of the capital stack.”

European CLO BWIC volumes rose to more than €100 million in the previous week.

“Unlike in recent weeks, most of the volume was focused on senior tranches, with three fairly large 2.0 AAA line items accounting for the majority of the volume,” the BofA Merrill Lynch analysts said. “We observed non-Volcker compliant 2.0 AAA paper trading at around 135 bps, only marginally wide of where compliant paper is currently trading in our observation. 1.0 AAA paper is currently trading at spreads in the low 100s.”

Trading volume has picked up in the past few weeks, and deal and manager tiering has remained pronounced, according to the Wells Fargo Securities analysts.

“Spreads have remained relatively flat month to date, with slight tightening over the past week across all tranches (with the exception of single-B spreads, which moved slightly wider),” the analysts said. “However, the market seems to lack conviction, likely driven by a combination of uncertainty around the Fed’s September actions, and currency and commodity movements.”

AAA-rated CLO notes were on average 3 basis points tighter on the month at Libor plus 147 bps. BBB notes traded 20 bps tighter from a month ago at Libor plus 410 bps.

Columbia Management prices

Columbia Management Investment Advisors sold an upsized $709.8 million of notes due Oct. 15, 2026 in the Cent CLO 24 Ltd./Cent CLO 24 Corp. transaction, according to a market source.

The CLO priced $431.9 million of class A-1 senior floating-rate notes at Libor plus 147 bps and $102.9 million of class A-2 senior floating-rate notes at Libor plus 220 bps at the top of the capital structure.

The deal was upsized from $509 million.

Goldman Sachs & Co. was the placement agent.

Columbia Management Investment Advisors will manage the CLO.

The CLO is non-callable until April 15, 2018. The reinvestment period ends April 15, 2020.

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

Columbia Management Investment has priced two CLO deals year to date.

The Boston-based investment management firm was in the primary market in 2014 with two CLO offerings.

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