U.S. CLO issuance forecast as brisk in 2015; Onex prices $513.7 million OCP CLO 2014-7

By Cristal Cody

Tupelo, Miss., Nov. 14 – U.S. CLO issuance is expected to stay brisk into 2015 ahead of the finalized risk retention rules that take effect in 2016, according to market participants.

“The finalization of the U.S. risk retention rules last month provided some clarity on the future of the CLO market,” Barclays analysts said in a note on Friday. “New CLO creation will likely diminish once the legislation is instated in late 2016. Until then, we expect higher issuance volumes as managers pull forward deals that will then be grandfathered into the new regime.”

Under the Dodd-Frank Act requirements, CLO managers must retain 5% capital of new deals beginning in 2016. U.S. CLOs brought before Oct. 21, 2016 will be grandfathered.

U.S. CLO issuance already has climbed to more than $114 billion, according to data compiled by Prospect News.

CLO issuance in 2015 is forecast at $100 billion to $120 billion, Barclays said.

“The new CLOs will likely comply with the Volcker Rule, as this year’s issues have, primarily by omitting bond buckets but also through the inclusion of voting rights for holders of senior tranches,” Barclays analysts said in the note.

In primary activity, Onex Credit Partners, LLC, which brought a $1 billion CLO deal in May, priced a $513.7 million CLO offering, according to a market source.

Onex prices

Onex Credit Partners sold $513.7 million of notes due Oct. 20, 2026 in the private placement offering via Citigroup Global Markets Inc., a market source said.

OCP CLO 2014-7 Ltd./OCP CLO 2014-7 Corp. priced $285 million of class A-1a senior secured floating-rate notes at Libor plus 160 basis points at the top of the capital structure.

The CLO also sold $25 million of 3.61% class A-1b senior secured fixed-rate notes; $67.5 million of class A-2a senior secured floating-rate notes at Libor plus 210 bps; $3 million of 4.65% class A-2b senior secured fixed-rate notes; $22 million of class B-1 senior secured deferrable floating-rate notes at Libor plus 300 bps; $10 million of 5.63% class B-2 senior secured deferrable fixed-rate notes; $27 million of class C senior secured deferrable floating-rate notes at Libor plus 360 bps; $21.75 million of class D senior secured deferrable floating-rate notes at Libor plus 520 bps; $10.5 million of class E senior secured deferrable floating-rate notes at Libor plus 575 bps and $41.95 million of subordinated notes.

Onex Credit Partners was in the primary market in May with the $1,001,750,000 OCP CLO 2014-6 Ltd./OCP CLO 2014-6 Corp. deal.

The credit investing arm of Toronto-based Onex Corp. priced the $420 million OCP CLO 2014-5 Ltd./OCP CLO 2014-5 Corp. transaction in March.

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