Ares, Brigade reset vintage CLOs; new issue demand strong; CLO primary spreads tighten

By Cristal Cody

Tupelo, Miss., June 22 – Two CLO managers repriced vintage CLO deals with the refinancing and new deal pace expected to remain strong, according to market sources on Thursday.

Ares CLO Management LLC refinanced $417 million of notes in a reset of 2013 CLO.

Brigade Capital Management, LLC came to the market to refinance its fifth CLO of the year. The CLO manager reset $458.15 million of notes from a 2015 vintage CLO deal.

Also, the Cavalry CLO III, Ltd./Cavalry CLO III, LLC vehicle plans to refinance its notes and change the collateral manager to Bain Capital Credit, LP from Regiment Capital Management, LLC, according to a trustee notice.

The vehicle would be renamed Bain Capital Credit CLO 2017-2, Ltd./Bain Capital Credit CLO 2017-2, LLC.

Regiment Capital Management issued $411.03 million of notes in the CLO on Dec. 11, 2013.

	Bain Capital is formerly known as Sankaty Advisors LP, which in 2015 acquired the management contracts for four portfolios of CLOs totaling $1.6 billion of assets from	Regiment Capital Advisors. The management contracts that were transferred were for Cavalry CLO II, Ltd.,	Cavalry CLO III,	Cavalry CLO IV, Ltd.	and	Cavalry CLO V, Ltd.
	Bain Capital has priced one new CLO and refinanced two vintage CLOs year to date. The Boston-based asset management firm is a subsidiary of Bain Capital LP.
	Refinancing action is expected to remain strong, Wells Fargo Securities, LLC analysts said in a note on Thursday.
	“We predict an uptick in CLO resets in H2,” the analysts said. “With AAA coupons in the L+150 [basis points] range, more of these 2015 deals could be reset should primary spreads remain at current levels (around 123 bps).”
	U.S. CLO new issue supply also “has remained strong over the past three months, with approximately $28.8 billion in new issue volume so far in Q2,” the Wells Fargo analysts said. “The last time the trailing three-month average issuance level was this high was May 2015. Given the high pace of issuance, and strong demand, we increase our 2017 U.S. issuance forecast to $85 billion.”
	Market participants at the end of 2016 had forecast about $60 billion to $80 billion of CLO supply for the year.
	Primary spreads have tightened in 2017 with CLO AAAs in the Libor plus 123 bps area, compared to a year ago at Libor plus 153 bps, according to the Wells Fargo note. BBs have priced in June at an average Libor plus 650 bps, in from Libor plus 800 bps in the year ago period.
Ares reprices 2013 notes
	Ares CLO Management refinanced $417 million of notes in a reset of the Ares XXVII CLO Ltd./Ares XXVII CLO LLC transaction, according to a market source and a notice of executed amended and restated indenture on Thursday.
	The CLO sold $229.1 million of class A-R-1 senior floating-rate notes at Libor plus 119 bps at the top of the capital stack.
	BofA Merrill Lynch was the underwriter.
	Ares CLO Management, a subsidiary of Ares Management LLC, will manage the CLO.
	The new notes are due July 28, 2030. The original notes were due July 28, 2025.
	In the original $412.8 million transaction that was issued on July 26, 2013, the CLO sold $99 million of class A-1 senior floating-rate notes at Libor plus 125 bps.
	The deal is backed primarily by broadly syndicated senior secured corporate loans.
	Ares Management has priced one new CLO and refinanced three vintage CLOs year to date.
	The CLO manager priced two new CLOs and refinanced two vintage CLOs in 2016.
	The alternative asset management firm is based in Los Angeles.
Brigade refinances $458.15 million
	Brigade Capital Management priced $458.15 million of global secured floating-rate notes in a refinancing and reset of a vintage 2015 CLO offering, according to a market source and a notice of executed supplemental indenture on Wednesday.
	Battalion CLO VIII Ltd./Battalion CLO VIII LLC sold $321.4 million of class A-1-R senior secured floating-rate notes at Libor plus 134 bps in the senior tranche.
	Morgan Stanley & Co. LLC was the refinancing placement agent.
	The maturity on the refinanced notes was extended to July 18, 2030 from the original April 18, 2027 maturity.
	The CLO notes are backed primarily by broadly syndicated senior secured corporate loans.
	In the original $504.9 million Battalion CLO VIII deal that was issued on April 9, 2015, the CLO sold $321.4 million of class A-1 senior secured floating-rate notes at Libor plus 153 bps.
	Brigade Capital Management has refinanced five CLOs year to date.
	The New York City-based investment advisor firm priced one new CLO transaction in 2016.

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