September CLO deal pipeline active; new issue spreads tight; European AAA demand high

By Cristal Cody

Eureka Springs, Ark., Sept. 1 – The CLO deal pipeline is filling up with September expected to be busy following strong August supply.

More than $6 billion of CLOs, including middle-market and refinancings, priced over the previous month, according to Prospect News data.

“In the U.S., 64 managers have issued year to date, compared to 86 in 2015,” Wells Fargo Securities, LLC analysts said in a note on Thursday.

Primary action is improving, while new issue AAA-BBB spreads in August were at their tightest levels in more than a year, the analysts said.

MJX Asset Management LLC’s AAA-rated tranche in the Venture XXIV CLO, Ltd. offering in August was among the tightest priced over the month at Libor plus 142 basis points.

Although the euro-denominated CLO market was subdued in August, “demand is high, especially for senior tranches; AAA spreads are almost 20 bps tighter since Brexit,” the Wells Fargo analysts said.

The U.S. CLO secondary market continues to be a “seller’s market, with high demand,” according to the note.

Secondary market activity has been lighter over the week in front of the Labor Day holiday weekend.

On Wednesday, $79.5 million traded in 25 high-grade CBO/CDO/CLO issues and $70.5 million traded in 14 non-investment-grade CBO/CDO/CLO securities, according to Trace.

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