CLOs stabilize; CBO/CDO/CLO issues mixed in secondary; euro AAAs firm; deal volume down

By Cristal Cody

Tupelo, Miss., April 3 – CLO paper headed out mostly steady with prices mixed in the secondary market over the week.

“After a chaotic and frantic two-week period, the CLO market has largely stabilized, with levels settling in a tighter range this week,” Wells Faro Securities, LLC analysts said in a note on Friday.

Average CLO AAA spreads have firmed to the Libor plus 230 basis points area with AAAs pegged at the mid-90s price level, according to the report.

BBB tranches have improved to the Libor plus 675 bps average area and high 70s price range in the secondary market.

“From the low point of two weeks ago, we would estimate a ten- to twelve-point gain for AAA’s,” the analysts said. “BBB’s have rallied by roughly 15 points, while BB’s are generally five points higher.”

Euro CLO spreads have been mostly steady over the week with AAAs about 15 bps tighter at the Euribor plus 275 bps area.

Secondary market volume remains strong in both high-grade and non-high-grade CBO/CDO/CLO securities, Trace data shows.

On Thursday, $573.7 million of investment-grade paper and $926.57 million of lower-rated issues were traded.

Prices softened for high-grade issues but improved further down the stack during the session.

High-grade paper softened to an average of 87 on Thursday from 91.10 on Wednesday, 90.90 on Tuesday and 89.20 on Monday.

Average prices on non-high-grade CBO/CDO/CLO securities improved to 67.40 on Thursday from 64.10 on Wednesday, 60.30 on Tuesday and 60.20 on Monday.

Investment-grade secondary market volume included $684.18 million of CBO/CDO/CLO securities on Wednesday, $1.03 billion on Tuesday and $659.65 million on Monday.

Trading volume in lower-rated CBO/CDO/CLO securities totaled $255.27 million on Wednesday, $140.88 million on Tuesday and $225.72 million on Monday.

In other action, Invesco European RR LP raised €410.25 million in a new broadly syndicated CLO transaction that was freed for trading on Friday.

Also on Friday, Kayne Anderson Capital Advisors, LP closed on its previously reported $604 million Kayne CLO 7 Ltd./Kayne CLO 7 LLC transaction. The CLO priced the senior notes at Libor plus 120 bps.

The primary market finished March down 40% year over year with no issuance seen over the back half of the month on the coronavirus-related market volatility, the Wells Fargo analysts said.

Meanwhile, U.S. broadly syndicated CLOs under Fitch Ratings’ surveillance “have been reducing exposure mostly to obligors in the gaming, leisure and entertainment and retail industries recently,” Fitch said in a report on Friday.

The exposure in the aggregate portfolio declined by 0.36% to 5.44% overall, while retail exposure declined by 0.23% to 3.58% in the period from Feb. 15 to March 28, Fitch said.

Invesco prints €410.25 million

Invesco European RR priced €410.25 million of CLO notes due April 15, 2033 in a new issue, according to market sources.

Invesco Euro CLO IV DAC sold €244 million of class A senior secured floating-rate notes at Euribor plus 93 bps at the top of the capital structure.

Merrill Lynch International was the placement agent.

The CLO is backed mostly by broadly syndicated first-lien senior secured corporate loans.

The notes were admitted for trading on Friday by Euronext Dublin for listing on the global exchange market.

Invesco European is a New York-based fund manager and subsidiary of Invesco, Ltd.

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