CLO deal pipeline remains light; spread widening dampens new issue, refinancing markets

By Cristal Cody

Tupelo, Miss., Jan. 29 – CLO deal action announcements remained quiet on Tuesday with the new issue and refinancing markets opening up slowly in 2019 on wider spreads.

The new issue-stated spreads on senior-most notes averaged 120 basis points over Libor in the fourth quarter, up from 115 bps in the third quarter, according to a Fitch Ratings report on Friday.

“In Europe, senior CLO spreads widened in fourth-quarter 2018 to average 98.5 bps, compared with 91.6 bps in the third quarter,” Fitch said. “CLO spread widening and loan price volatility has put a pause to the market as bankers and managers determine when the economics make sense to convert warehouses to new CLOs.”

BofA Merrill Lynch analysts on Friday lowered their CLO refinancing forecast for 2019 by nearly half to $55 billion from $100 billion of refinancing and reset volume initially predicted in December.

Golub trades

In other action, on Tuesday, $433.66 million of notes due July 20, 2030 from the broadly syndicated Golub Capital Partners CLO 37(B), Ltd./Golub Capital Partners CLO 37(B), LLC deal were admitted for listing and trading on the Global Exchange Market, according to a notice from Euronext Dublin.

Golub Capital affiliate GC Investment Management LLC priced eight tranches of notes in the CLO deal on Aug. 15. Seven tranches, excluding the $54.16 million of subordinated notes in the equity tranche, were admitted for trading.

The notes admitted for trading include $248 million of class A-1 senior secured floating-rate notes that priced at Libor plus 118 bps; $24.5 million of class A-2 senior secured floating-rate notes sold at Libor plus 155 bps; $15 million of class B-1 senior secured floating-rate notes placed at Libor plus 180 bps; $17 million of 4.83% class B-2 senior secured fixed-rate notes; $33.5 million of class C secured deferrable floating-rate notes priced at Libor plus 235 bps; $27.5 million of class D secured deferrable floating-rate notes brought at Libor plus 330 bps and $15 million of class E secured deferrable floating-rate notes sold at Libor plus 575 bps.

In the securitized secondary market on Monday, trading volume was strong with $324.57 million of high-grade CBO/CDO/CLO securities and $117.55 million of non-high-grade issues traded, according to Trace data.

Prices on the high-grade securities averaged 98.3 on Monday, while lower-rated issues traded with an 86.3 average trading price.

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