May set to surpass April CLO issuance with about $3.5 billion sold; AA-rated CLO spreads firm

By Cristal Cody

Tupelo, Miss., May 17 - More than $1 billion of notes priced over the week in the collateralized loan obligation market from Columbia Management Investment Advisors, LLC, Octagon Credit Investors, LLC and CIFC Asset Management LLC, market sources report.

"We've seen about three deals price this week, and a few at the end of last week, so we've definitely seen a bit of an uptick," one source said. "All of April there was $3.8 billion [of issuance], and already in May we're about $3.5 billion, so there's definitely been more issuance in May than April."

Less than $2 billion of new issuance is expected in the week ahead from a couple possible transactions, while other CLO deals are forecast before the month ends from Carlyle Group LP, KKR Asset Management LLC and CVC Credit Partners, LLC, according to an informed source.

"We're still on track to be over $75 billion for the year," the source said.

In the Octagon CLO, a $298.5 million tranche of class A senior secured floating-rate notes (Aaa//) priced at Libor plus 112 basis points.

Triple A-rated CLO spreads have not yet pierced the Libor plus 110 bps threshold, "but the remainder of the CLO liability stack continues to tighten," Barclay's credit analysts said in a note on Friday. "Most recently, Columbia Management achieved a AA print of L+155 [bps] on CENT 18, tighter than any other 2.0 AA tranche so far."

Cent CLO 18 Ltd./Cent CLO 18 Corp. sold a total of $527.5 million of notes due July 2025 that included a $315 million tranche of class A floating-rate notes (Aaa//) priced at Libor plus 112 bps and $55.5 million of class B-1 deferrable floating-rate notes at Libor plus 155 bps.

Octagon brings $518 million

Octagon Investment Partners XVI, Ltd./Octagon Investment Partners XVI, LLC sold $518 million of notes due July 15, 2025 in the CLO.

The deal also included $63 million of class B-1 senior secured floating-rate notes priced at Libor plus 160 bps, $10 million of 3.07% class B-2 senior secured fixed-rate notes, $27.5 million of class C-1 secured deferrable floating-rate notes at Libor plus 275 bps, $10 million of 4.3% class C-2 secured deferrable fixed-rate notes, $27 million of class D secured deferrable floating-rate notes at Libor plus 335 bps, $23.5 million of class E secured deferrable floating-rate notes at Libor plus 450 bps, $14 million of class F secured deferrable floating-rate notes at Libor plus 550 bps and $44.5 million of subordinated notes.

Bank of America Merrill Lynch arranged the offering.

Octagon Credit Investors, LLC will manage the CLO, which is backed by broadly syndicated senior loans.

The New York-based credit management firm has 10 CLOs outstanding.

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