BlueMountain sells $428.75 million CLO; triple A notes widen as other tranches hold flat

By Cristal Cody

Tupelo, Miss., June 18 - BlueMountain Capital Management LLC sold a $428.75 million collateralized loan obligation offering, including a triple A tranche priced about 10 basis points wider than deals brought in late May, according to informed sources.

Triple A-rated tranches have widened to the 120 bps to 125 bps plus Libor area, market sources said.

"From last month in the new issue market, they're anywhere from 10 to 15 basis points wider on the triple As," one source said. "Triple As are a tad softer, but for the most part, the market is holding in. I haven't seen too much stuff trade, especially on the 2.0 deals."

Triple A tranches widened as banks moved down the capital structure following the Federal Deposit Insurance Corp.'s April 1 new rule for calculating deposit insurance assessments for large institutions to require CLOs be treated as higher-risk assets, sources report.

Tranches in the rest of the capital structure in new issuance are holding in the 170 bps plus Libor area for AA-rated notes; 355 bps plus Libor area for BBB-rated notes and 505 bps area for BB-rated notes, sources said.

"Deals are still getting done," a source said on Tuesday. "I see a lot of activity in the pipeline, so there's no letup in new issues in this space. They wouldn't be able to get all these deals done if they didn't have all the triple A buyers in place."

The deal pipeline is expected to include issuance from bigger CLO managers and second-tier CLO managers, including a $413 million offering from Invesco Ltd. in June.

Standard & Poor's reports the ratings agency has about $17 billion of CLOs in the rating stage, up from an earlier report of $16 billion in the pipeline.

"That number's been increasing since March," another market source said. "It's definitely robust. We're already at $40 billion of issuance for the year. Last year, we were at $55 billion for the whole year. We'll probably reach that by the end of summer."

BlueMountain prices

BlueMountain Capital Management, which sold the $514.2 million BlueMountain CLO 2013-1 Ltd./BlueMountain CLO 2013-1 LLC in May, priced a $428.75 million offering of notes due Jan. 15, 2025 on Tuesday, according to an informed source.

BlueMountain CLO 2013-2 Ltd./BlueMountain CLO 2013-2 LLC sold $259.725 million of class A floating-rate notes (/AAA/) at Libor plus 125 bps.

The CLO also sold $26,175,000 of class B1 floating-rate notes (/AA/) at Libor plus 170 bps; $20 million of class B-2 3.369% fixed-rate notes (/AA/); $35,535,000 of class C deferrable floating-rate notes (/A/) at Libor plus 265 bps; $21.2 million of class D deferrable floating-rate notes (/BBB/) at Libor plus 355 bps; $18.4 million of class E deferrable floating-rate notes (/BB/) at Libor plus 505 bps; $13,375,000 of class F deferrable floating-rate notes (/B/) at Libor plus 520 bps; and $34.35 million of subordinated notes.

J.P. Morgan Securities LLC was the placement agent.

In the BlueMountain CLO 2013-1 deal, BlueMountain Capital sold $310 million of series A-1 senior secured floating-rate notes (/AAA/) at Libor plus 120 bps; $57 million of class A-2A senior secured floating-rate notes (/AA/) at Libor plus 175 bps; $5 million of 3.193% class A-2B fixed-rate notes (/AA/); $39 million of class B deferrable floating-rate notes (/A/) at Libor plus 265 bps; $26 million of class C deferrable floating-rate notes (/BBB/) at Libor plus 340 bps; $23.6 million of class D deferrable floating-rate notes (/BB/) at Libor plus 460 bps; and $53.6 million of subordinated notes.

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