LCM prices new CLO AAAs at 155 bps spread; secondary paper forecast to gain new issue demand

By Cristal Cody

Eureka Springs, March 18 – CLO market action picked up on Friday, though volume is expected to stay light over the rest of the year.

LCM Asset Management LLC priced $381.06 million of notes in the firm’s first new CLO deal of the year.

Carlyle Investment Management LLC also priced its Carlyle Global Market Strategies CLO 2016-1, Ltd./Carlyle Global Market Strategies CLO 2016-1 LLC transaction via J.P. Morgan Securities LLC. Final pricing details for Carlyle’s offering were not available by press time.

“Despite the recent rally in the broader credit market, the primary CLO market is unlikely to be the major beneficiary,” according to a Morgan Stanley & Co. LLC note released on Friday.

Morgan Stanley earlier in the month reduced its 2016 issuance forecast to $40 billion to $45 billion from $60 billion and expects demand for CLO equity to be weak this year.

“The U.S. credit cycle has likely turned already,” Morgan Stanley analysts said in the note.

“Issuance volumes are typically lower in the late stage of the cycle, for both loans and CLOs as lending conditions tighten and investors turn risk averse. Secondary CLO valuations are more dislocated and the demand for new issue paper will likely give way to that for secondary paper.”

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