Anchorage prices $517.5 million CLO; BlueMountain upsizes; AAA, A spreads unchanged

By Cristal Cody

Tupelo, Miss., Aug. 24 – Details emerged on new CLO issuance that brings year to date U.S. volume to nearly $80 billion, according to market sources and Prospect News data.

Anchorage Capital Group, LLC brought a $517.5 million CLO offering.

BlueMountain Capital Management LLC priced an upsized $457.25 million deal.

“August is on pace to be the second consecutive month with less than $7.5 [billion] in new issue U.S. CLO supply following the $7.3 [billion] total in July,” J.P. Morgan Securities LLC analysts said in a note.

The sell-off in stocks and widening credit spreads seen over the last week and on Monday are expected to impact CLOs, with spreads forecasted to move wider in the month ahead, according to BofA Merrill Lynch.

“Given the broad market volatility, some warehouse facilities likely became underwater and we expect to see slower issuance in the near term,” BofA Merrill Lynch analysts said in a note. “On the other side of the Atlantic, no new deals have priced thus far in August. However, we expect the rest of the year to be busy.”

More than €9 billion of CLOs have priced year to date. BofA Merrill Lynch forecasts €18 billion of euro-denominated CLO issuance for the year.

Spreads mostly unchanged

The U.S. secondary market saw nearly $450 million of BWIC volume over the previous week with nearly three-quarters of volume in senior AAA-rated bonds, the BofA Merrill Lynch analysts said.

“Spread levels held relatively firm in this part of the capital structure given the broad market volatility,” the analysts said.

AAA-rated CLO spreads remain unchanged at the Libor plus 150 basis points area. CLO A-rated spreads were flat at the Libor plus 300 bps area, BofA Merrill Lynch said.

Post-crisis CLO BBs are trading in a range of 610 bps to 800 bps, depending on factors including exposures to distressed companies and manager tiering, according to the JPMorgan analysts.

In January, CLO BBs traded in the 625 bps to 760 bps band, the analysts said.

Post-crisis BBB notes are trading in the 360 bps to 500 bps range, according to the note.

“BBB trading levels in January were in a range of 410-470 bps when the fundamental picture was arguably better than it is today,” JPMorgan analysts said.

Anchorage prices CLO

In the new issue market, Anchorage Capital Group priced the $517.5 million Anchorage Capital CLO 7, Ltd./Anchorage Capital CLO 7, LLC deal, a source said.

The CLO sold $266.25 million of class A senior secured floating-rate notes (Aaa/AAA/) at par to yield Libor plus 157 bps in the senior tranche.

Morgan Stanley & Co. LLC was the placement agent.

Anchorage Capital Group will manage the CLO.

The class X notes are due Oct. 15, 2018. The other tranches are due Oct. 15, 2027.

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

Anchorage Capital Group has priced two CLO transactions and one CDO offering in 2015.

The New York City-based global asset manager brought three CLO transactions in the previous year.

BlueMountain brings CLO

BlueMountain Capital Management sold $457.25 million of notes due Oct. 20, 2027 in its CLO deal that was upsized by $50 million, according to a market source.

BlueMountain CLO 2015-3 Ltd./BlueMountain CLO 2015-3 LLC priced $286.75 million of class A-1 floating-rate notes at Libor plus 148 bps at the top of the capital structure.

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

BlueMountain Capital Management will manage the CLO.

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

BlueMountain Capital Management has priced two CLO transactions year to date.

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

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