CLO spreads remain weak; BB, B notes at widest levels in years; soft spreads impact volume

By Cristal Cody

Tupelo, Miss., Dec. 9 – New issue CLO spreads remain mostly weak as the year comes to a close, keeping volume low, according to market sources.

“CLO spreads are at their widest spreads for years for some tranches,” Deutsche Bank Securities Inc. analyst Bjarni Torfason said in a report on Wednesday. “CLO spreads started the widening that has continued throughout the fall, causing issuance to fade to just over $30 billion in the second half of the year.”

New issue AAAs are pricing on average in the Libor plus 160 basis points area, at the widest seen over the past four years and wider than the Libor plus 110 bps area seen a couple of years ago, according to the note.

Manager tiering remains pronounced in deals, market sources said.

At the start of the month, CreekSource LLC priced the AAA-rated tranche in the Bean Creek CLO, Ltd./Bean Creek CLO LLC deal, its second transaction in 2015, at Libor plus 162 bps.

Frequent CLO issuer BlackRock Financial Management, Inc. placed the AAA slice in the Magnetite XVI, Ltd./Magnetite XVI LLC transaction on Dec. 3 at Libor plus 150 bps.

CVC Credit Partners, LLC sold the AAA tranche in its third transaction of 2015, Apidos CLO XXIII/Apidos CLO XXIII LLC, on Dec. 3 at Libor plus 149 bps.

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