U.S., European CLO refinancing action steady in August; euro mezzanine spreads tighten

By Cristal Cody

Tupelo, Miss., Aug. 21 – The CLO refinancing space remains active in both the U.S. and European markets, according to a BofA Merrill Lynch report released on Monday.

The U.S. market has seen year-to-date refinancing volume of nearly $117 billion, including five CLOs refinanced or reset in the previous week, according to the note.

In 2016, CLO managers refinanced $41.1 billion of CLOs.

The European CLO market had one CLO refinancing transaction in the past week and about €17.3 billion of refinanced and reset CLO volume year to date, the BofA Merrill Lynch analysts said.

In the secondary market, U.S. spreads ended Friday flat on the week across the capital stack, according to the report.

AAAs were unchanged at Libor plus 110 basis points.

The U.S. secondary market had about $334 million of bonds up for bid.

“CLO paper, especially at the senior part of the capital stack, was well bid,” the BofA Merrill Lynch analysts said. “Generic secondary spreads for US CLO 2.0s remained unchanged, with yield-to-worst a bit tighter for AAAs.”

European CLO spreads tightened 10 bps to 15 bps in the mezzanine tranches in the secondary market. Euro BBBs traded on Friday 10 bps tighter on the week at Euribor plus 290 bps, the report said. AAAs were flat at Euribor plus 88 bps.

“Trading volumes were reasonably high given the time of year, with around €70 [million] of bonds appearing on lists,” the analysts said.

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