Octagon Investment XVII prices $417.78 million CLO; $15 billion of CLO deals in pipeline

By Cristal Cody

Tupelo, Miss., Aug. 23 - More than 30 CLO deals totaling about $15 billion are in the works and are expected to price in the coming months, according to a market source on Friday.

Year to date, more than $51 billion in 107 CLOs have priced, the source said.

August issuance has remained strong with more than $5.4 billion of deals brought after Apollo Credit Management LLC priced about $1.8 billion in two CLO transactions.

"Demand for floating-rate product remains robust," Barclays analysts said in a note on Friday.

CLO spreads are closing the month tighter based on recent issuance, a source said.

Octagon Credit Investors, LLC brought a $417.78 million CLO and priced the AAA-rated tranche at Libor plus 133 basis points, while Apollo Credit Management also sold the AAA-rated tranches in the ALM VII(R), Ltd./ALM VII(R), LLC and ALM VII(R)-2, Ltd./ALM VII(R)-2, LLC CLOs at Libor plus 133 bps, sources said.

In the secondary market, CLO spreads were seen over the week in the area of Libor plus 133 bps in AAA-rated notes; the Libor plus 180 bps area for AA-rated notes; the Libor plus 325 bps area for A-rated notes; the Libor plus 415 bps area for BBB-rated tranches and the Libor plus 615 bps area for BB-rated notes, a market source said.

Leveraged loan demand is expected to stay high with new repricings likely in the fall, according to the Barclays analysts.

"Demand remains strong, while supply has been more muted," the analysts said. "If supply and demand technicals continue to diverge, we believe a new repricing wave could be in the works."

Octagon XVII prices

Octagon Credit Investors' CLO offering included fixed-rate, floating-rate and subordinated notes due Oct. 27, 2025, an informed source said.

At the top of the structure, Octagon Investment Partners XVII, Ltd./Octagon Investment Partners XVII, LLC priced $141 million of class A-1 senior secured floating-rate notes (Aaa/AAA/) at Libor plus 133 bps; $85 million of class A-2 senior secured floating-rate notes (Aaa/AAA/) at Libor plus 110 bps and $25 million of 3.22% class A-3 senior secured fixed-rate notes (Aaa/AAA/).

The CLO also sold $40 million of class B-1 senior secured floating-rate notes (/AA/) at Libor plus 170 bps; $5 million of 4.01% class B-2 senior secured fixed-rate notes (/AA/); $31.75 million of class C secured deferrable floating-rate notes (/A/) at Libor plus 280 bps; $21.75 million of class D secured deferrable floating-rate notes (/BBB/) at Libor plus 320 bps; $17.75 million of class E secured deferrable floating-rate notes (/BB/) at Libor plus 450 bps; $9.25 million of class F secured deferrable floating-rate notes (/B/) at Libor plus 515 bps; and $37.28 million of subordinated notes.

Wells Fargo Securities LLC arranged the offering.

Octagon Credit Investors will manage the CLO. The New York-based credit management firm manages 11 CLOs.

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