Details emerge in new KKR Financial CLO; new-deal tally trends lower; spreads widen

By Rebecca Melvin

New York, July 8 – Details emerged in a single new collateralized loan obligation on Wednesday. KKR Financial Advisors II LLC priced $413 million of notes due July 2027, with spreads of Libor plus 140 basis points for the three tranches at the top of its capital structure.

Pricings are trickling through, but CLO primary market volume is generally expected to slow from the first half, and June’s new deal tally was already about 11% lower compared to May’s, which was low compared to March and April.

There were 20 deals for $10.17 billion in new U.S. CLO issues in June, compared to 25 deals for $11.41 billion in May, according to Prospect News’ data.

Wells Fargo Securities’ David Preston said in a recent note that May 2015 brought the lowest monthly U.S. CLO issuance total, excluding January, since September 2013.

In the loan market, new issuance has increased. As of March 31, institutional primary issuance was only 44% of 2014’s total at the same point. But at the end of May, institutional issuance year to date, which stood at $113 billion, was 57% of 2014’s May month-end total, which was $198 billion.

The mix of issuance for the year to date is almost 50% high yield, 21% pro rata and only 32% institutional loans. That compares to 2013 and 2014, when leveraged finance was 45% to 50% institutional loans, 17% pro rata loans and 36% high yield.

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