3i Debt prices €413.9 million CLO; BBBs remain weak in secondary market, AAs, As ‘stickier’

By Cristal Cody

Tupelo, Miss., Oct. 16 – 3i Debt Management Investments Ltd. brought the month’s first euro-denominated CLO deal, brining year to date issuance to nearly €20 billion, according to a market source and Prospect News data.

3i Debt priced €413.9 million of notes in the CLO offering.

In the CLO secondary market, BBB-rated tranches remained soft over the week.

CLO BBB spreads have widened 40 basis points to 50 bps since mid-September, while BB spreads have widened 100 bps, Wells Fargo Securities LLC analysts said in a note on Friday.

“AA and single-A spreads have remained stickier, with very little widening,” the analysts said.

Growing investor scrutiny on potential pressure points in CLO portfolios is leading to elevated tiering in the secondary markets, according to the note.

“BBB tranches from CLOs with high-performing, clean pools trade at discount margins in the 425-440 [bps] area, while BBB tranches from CLOs with higher concentrations of pressured assets can trade wide of 575 bps,” the Wells Fargo analysts said.

BB tranches are trading in a wider range, “from 725 bps at the tights to well north of 1,000 bps,” the analysts said.

3i prices third deal

3i Debt Management Investments sold €412.5 million of euro-denominated notes due Nov. 15, 2028 in the Harvest CLO XIV Designated Activity Co. transaction, according to a market source.

The CLO priced €139 million of class A-1A senior secured floating-rate notes at three-month Euribor plus 140 basis points, €100 million of class A-1B senior secured floating-rate notes at six-month Euribor plus 145 bps and €5 million of 1.76% class A-2 senior secured fixed-rate notes.

Citigroup Global Markets Inc. arranged the transaction.

3i Debt Management Investments will manage the CLO.

The CLO has a reinvestment period that ends in 2019.

The CLO is backed by senior secured obligations.

Proceeds from the deal will be used to purchase a €400 million portfolio of European leveraged loans and bonds.

3i Debt Management has priced three euro-denominated CLOs year to date. The affiliate of London-based 3i Group plc placed three European CLO deals in 2014.

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