High-grade secondary CLO supply tops $1 billion; AAAs firm 10 bps; Invesco reprices

By Cristal Cody

Tupelo, Miss., Aug. 14 – While broadly syndicated CLO primary action remains light, secondary supply has been heavy over the week.

On Thursday, $1.08 billion of high-grade CBO/CDO/CLO paper was traded, compared to $640.94 million on Wednesday and $1.25 billion on Tuesday, according to Trace data.

The high-grade issues improved on Thursday to 97.50 from 96.70 on Wednesday but off of Tuesday’s average of 98.30.

Lower down the capital stack, $557.76 billion of non-high-grade CBO/CDO/CLO notes traded in the prior session, up from $338.79 million on Wednesday and $200.88 million on Tuesday.

The non-investment-grade notes softened to an average 79.60 on Thursday from 81.90 on Wednesday and 79.80 on Tuesday.

CLO AAAs tightened by roughly 10 basis points on the week, Wells Fargo Securities, LLC analysts said in a note on Friday.

Primary AAAs are trending at Libor plus 155 bps, while tighter at the Libor plus 141 bps average in the secondary market and at Libor plus 130 bps area in the refinancing space.

Despite nearly $1.5 billion in BWIC volume, “CLOs moved tighter on the week across the stack, with the most pronounced tightening in AAA’s,” the analysts said. “Single-A’s through BB’s tightened by roughly 25-35 bps as well.”

BB tranches are mirrored at Libor plus 800 bps in both the primary and secondary markets.

“The CLO AAA rally is long overdue, as AAA’s lagged the July rally in IG Corporates and CMBS AAA’s,” the analysts said. “Between the end of June and last week, IG corporates tightened by over 25 bps, and CMBS was roughly 20 bps tighter – yet secondary CLO AAA’s only moved 12 bps-15 bps tighter in the same period.”

The “relative slowdown in primary issuance, and an increasingly compelling relative value comparison, led to the CLO AAA tightening,” the analysts said. “At 155 bps, primary AAA’s still lag other markets (only 10 bps tighter since the end of June).”

Broadly syndicated CLO volume totals more than $44 billion year to date.

Invesco prices $67 million

Meanwhile, the refinancing space has resumed action in July and August after coming to a standstill amid the pandemic’s start in March.

Invesco Senior Secured Management, Inc. refinanced $67 million of class A-1B-2 senior secured fixed-rate notes in a second refinancing of a vintage 2016 broadly syndicated CLO, according to a market notice.

Upland CLO, Ltd./Upland CLO, LLC sold $67 million of class A-1B-2 senior secured fixed-rate notes (expected ratings Aaa//AAA) with a 1.842% coupon.

MUFG was the refinancing placement agent.

The original $406.25 million Upland CLO was issued on May 3, 2016 and was refinanced in a $407.85 million transaction on May 4, 2018.

In that offering, the CLO sold $67 million of class A-1B-R senior secured fixed-rate notes at a 3.982% coupon.

CLO managers including Fortress Investment Group LLC affiliate FCOD CLO Management LLC and MJX Asset Management LLC also have repriced vintage CLOs in August.

Refinancing volume totals about $23 billion year to date, according to market sources.

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