Redding Ridge prices €391.8 million CLO; ratings downgrades continue; loan outflows dip

By Cristal Cody

Tupelo, Miss., July 31 – In new CLO primary market action, Redding Ridge Asset Management (UK) LLP priced a €398.1 million broadly syndicated CLO in the manager’s second euro-denominated deal this year.

About $42 billion of dollar-denominated CLOs and about €10 billion of euro-denominated CLOs have priced year to date, according to market sources.

Deal volume in July included new dollar- and euro-denominated issuance, as well as the first CLO refinancing transaction priced since March.

Global CLO issuance reemerged, while credit quality still suffered over the second quarter, according to a Fitch Ratings report on Friday.

“The deterioration of the credit quality of the portfolios backing U.S. BSL, U.S. middle market and European CLOs over the past few months has led to an increase in CCC holding and a decrease in net portfolio gains,” Fitch said. “Many U.S. and EMEA CLOs reported CCC exposure above their limitation, leading to haircuts on the excess CCC and decreases in the OC test cushions. Primary CLO issuance picked up through the quarter with more conservative structures than were done earlier in the year.”

Elsewhere, the market was absorbing additional ratings downgrades on CLOs this week.

Fitch announced ratings actions on several euro-denominated CLOs on Friday.

S&P Global Ratings said in a credit update report on Friday that on July 24 and July 29, the agency downgraded 63 additional CLO tranches by 1.2 notches on average.

Currently, 496 tranches across 287 CLO transactions are still on CreditWatch with negative implications, S&P said.

“After peaking in late March and early April, negative rating actions on U.S. corporate entities have moderated,” the agency said. “Since early March, just under 31% of U.S. BSL CLO collateral have been downgraded or placed on CreditWatch.”

Elsewhere, leverage loan funds saw a seventh consecutive week of outflows with $211 million of redemptions over the past week ended Wednesday, down from $221 million in the prior week, Fitch said.

Year-to-date net outflows total $18.3 billion.

Meanwhile, the securitized secondary market remained active over the week in high-grade and non-investment-grade CBO/CDO/CLO notes, according to Trace data.

On Thursday, $266.04 million of high-grade paper and $231.56 million of lower-rated issues were traded.

The investment-grade CBO/CDO/CLO issues traded at an average 96.80, compared to an 80 average for non-high-grade paper.

RRE 4 CLO prints

Redding Ridge Asset Management (UK) priced €398.1 million of notes due April 15, 2032 in the new CLO offering, according to a market source.

RRE 4 Loan Management DAC sold €232 million of class A-1 senior secured floating-rate notes at Euribor plus 145 basis points at the top of the capital structure.

J.P. Morgan Securities plc was the placement agent.

The CLO has a non-call period ending Sept. 17, 2021. The reinvestment period ends Oct. 15, 2023.

The notes are collateralized primarily by broadly syndicated senior secured obligations.

Redding Ridge has priced two new euro-denominated CLOs year to date.

The London-based firm is part of Redding Ridge Asset Management, LLC, a New York City-based asset management company established in 2016 by Apollo Global Management, LLC.

© 2015 Prospect News.
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