MJX brings firm’s first CLO deal of year; thin primary loan volume pressures CLO issuance

By Cristal Cody

Eureka Springs, Ark., June 17 – MJX Asset Management LLC priced $411.25 million of notes in the firm’s first CLO deal of the year.

The offering brings year-to-date U.S. CLO issuance to about $22.36 billion in 54 deals, according to Prospect News data.

Lighter primary loan volume is impacting CLO issuance, according to a Wells Fargo Securities, LLC note on Friday.

“We see the following two primary reasons for the lack of loan supply: regulatory pressure that limits leverage on new issue loans, and a difficult buyout/M&A environment for sponsors,” Wells Fargo analysts said in the note.

“Strategic buyers have low borrowing costs and high equity prices, allowing them to outbid sponsors, who are also constrained in the amount of leverage they can use. The difficulty in finding collateral is reflected in the low U.S. CLO issuance figures (down 56% year to date), but also in smaller deal sizes.”

Year to date, the average U.S. CLO size is $421 million, down from $521 million in 2015 and $528 million in 2014, according to the Wells Fargo Securities note.

“We believe that low supply and high demand for loans will lead to tighter loan spreads over the next three months,” the analysts said.

“For CLO investors, we see two possible outcomes, both leading to tighter CLO spreads. Tighter loan spreads can lead to tighter primary CLO spreads, or CLO issuance will stall due to pressure on new issue equity returns, leading to technical pressure and tighter CLO spreads.”

MJX prices $411.25 million

MJX Asset Management priced $411.25 million of notes due July 15, 2028 in the Venture XXIII CLO, Ltd. transaction, according to a market source.

The CLO sold $256 million of class A senior secured floating-rate notes at Libor plus 165 basis points at the top of the capital structure.

Credit Suisse Securities (USA) LLC arranged the offering.

The deal is backed by a portfolio of broadly syndicated non-investment-grade loans and other assets.

MJX Asset Management priced three new CLO deals and refinanced one vintage CLO in 2015.

The asset management company is based in New York City.

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