Credit Suisse prices $813.6 million Madison Park CLO; trend toward tighter spreads intact

By Rebecca Melvin

New York, May 1 – Pricing of the CLO market’s latest issue showed the continuation of a trend toward tighter spreads.

The top three tranches of the Madison Park Funding XVII Ltd./Madison Park Funding XVII LLC CLO by manager Credit Suisse Asset Management, LLC priced at a floating rate of Libor plus 145 basis points.

“The new issue prices that have been released in April show very strong pricing,” Deutsche Bank research analyst Bjarni K. Torfason wrote in a note published April 29.

The tighter pricing comes amid what appeared to be decent issuance. April issuance was not as strong as March, which was a record-breaker, but close to the average $10 billion mark.

New issuance is expected to drop off, but it hasn’t yet. Deutsche Bank’s Torfason notes that “as loan spreads have tightened more rapidly than CLO liabilities, expectations are for slower pace over the next few months unless CLO liabilities extend their tightening from earlier this year”

Meanwhile higher loan prices in the leveraged loan market are starting to give rise to higher repricings. And April is set to be the largest loan repricing month in a year. Nevertheless, loan issuance also picked up slightly as loan spreads tightened.

So April is the largest loan issuance month since September. But the volume was still considerably less than September.

CLO spreads continue to move tighter, Wells Fargo Securities analysts Dave Preston and Jason McNeilis wrote in a note published Friday.

“BB spreads are 25 bps to 50 bps tighter than at the end of March 2015, and a recent deal pricing featured single-A spreads inside 300 bps, and BBB spreads inside of 400 bps, as well as a single-B tranche inside 800 bps. We expect tightening to continue, at least until loan supply allows for more primary issuance.”

Madison Park XVII prices

The latest Madison Park Funding CLO for $813,605,000 priced with tight spreads particularly at the top of the capital structure for the bundled notes due July 21, 2027.

The issuer and co-issuer sold $200 million of class A-1 senior secured floating-rate notes at Libor plus 145 bps; $200 million of class A-2 senior secured floating-rate notes at Libor plus 145 bps; and $109.35 million of class A-3 senior secured floating-rate notes at Libor plus 145 bps at the top of the capital structure.

The issuer also priced $93.3 million of class B senior secured deferrable floating-rate notes at Libor plus 200 bps; $46.65 million of class C senior secured deferrable floating-rate notes at Libor plus 290 bps; $49.3 million of class D senior secured deferrable floating-rate notes at Libor plus 345 bps; $38.7 million of class E deferrable floating-rate notes at Libor plus 545 bps; $14 million of class F deferrable floating-rate notes at Libor plus 640 bps and $62.31 million of subordinated notes.

Credit Suisse Asset Management will manage the CLO, which was arranged by Wells Fargo Securities LLC.

The CLO has a slightly shorter-than-normal non-call period of 1.7 years and a slightly longer reinvestment period of 4.2 years.

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