Apollo tightens AAA tranche by 10 bps in first refinanced CLO of year; secondary thin

By Cristal Cody

Eureka Springs, Ark., March 9 – Apollo Credit Management (CLO) LLC tightened the coupon on a AAA-rated tranche in a vintage CLO deal by 10 basis points and restructured the transaction to comply with Volcker risk retention regulations.

Apollo Credit Management refinanced $120 million of class A-1b senior secured floating-rate loans due Jan. 20, 2026 in the ALM VIII, Ltd./ALM VIII LLC vehicle at Libor plus 155 bps, according to a market source.

The transaction is the first refinancing of a CLO undertaken in 2016 as new issue volume remains thin.

In 2015, CLO managers refinanced $10.46 billion of vintage CLOs, according to BofA Merrill Lynch.

“Given market conditions, a refinancing was perhaps not to be expected but the motivation for the refinancing is also unusual as the refinanced tranche is a step-up tranche,” Deutsche Bank Securities Inc. analyst Bjarni Torfason said in a note on Wednesday.

When the tranche originally priced in 2013, it paid Libor plus 110 bps and stepped up to Libor plus 165 bps in July 2015. The coupon was scheduled to step up again to Libor plus 195 bps in July 2016.

In other CLO market activity, secondary trading volume has been light and mostly concentrated in the mezzanine tranches, a source said.

CLO 2.0 AAAs are trading from Libor plus 170 bps to 200 bps, while BBB-rated notes were quoted in the 575 bps to 700 bps over Libor area, according to Deutsche Bank.

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