CLO primary action thins in August; CLO AAA spreads tighten over month, week

By Cristal Cody

Tupelo, Miss., Aug. 31 – CLO market activity remains light with little action expected by market participants until after the Labor Day holiday.

New dollar-denominated broadly syndicated CLO issuance totals about $4 billion in August, while managers also priced static CLOs, middle-market CLOs and refinanced vintage CLO notes to bring volume to over $8 billion for the month, according to market sources and Prospect News data.

August CLO volume was down 60% from July’s supply, according to a Wells Fargo Securities LLC research report.

Wells Fargo analysts said in a note on Monday they expect $65 billion of dollar-denominated supply for the year.

Year to date, about $48 billion of dollar-denominated broadly syndicated CLOs have priced, while new middle-market volume totals about $5 billion this year, market sources report.

About $26 billion of vintage CLOs have been refinanced year to date.

While the primary market thinned, CLO AAA-rated spreads improved 15 basis points over August, according to a BofA Securities, Inc. global research note released on Monday

Over the past week, CLOs “saw AAAs and single Bs tighten,” the BofA report said.

AAAs were quoted 5 bps tighter on the week at Libor plus 135 bps.

CLO B-rated tranches came in 25 bps on the week to Libor plus 1,550 bps.

The rest of the capital stack was flat on the week.

Single A tranches were quoted at Libor plus 275 bps, while BBB spreads were unchanged at Libor plus 490 bps, according to the note.

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