CLO refinancing action resumes; MJX partially reprices three vintage CLOs; AAAs improve

By Cristal Cody

Tupelo, Miss., Aug. 10 – The CLO refinancing space has resumed activity after coming to a standstill following the Covid-19 pandemic start in March.

MJX Asset Management LLC repriced the fixed-rate tranches from three vintage CLOs issued in 2017 and 2018.

“Refis of fixed-rate tranches have increased as swap rates have rallied by 140 [basis points] since the beginning of the year,” BofA Securities, Inc. analysts said in a research note released on Monday.

“On a yield basis, it is cheaper for issuers to refi those bonds despite spreads widening,” the analysts said. “Since Covid, at least eight deals have refinanced their fixed-rate tranches and we estimate another 40 deals with fixed-rate bonds that could reduce their liability costs if they refi.”

Fixed-rate tranche yields are lower by 107 bps versus 2019 year-end levels despite higher spreads, with managers and equity holders now opting to refinancing outstanding fixed-rate investment-grade bonds, according to the report.

Refinancing volume totals about $23 billion year to date, while new issue supply totals about $44 billion, according to market sources.

Meanwhile, CLOs remained “well bid across the capital structure” for the past week, according to the BofA report.

AAAs tightened an average 5 bps to Libor plus 145 bps.

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