CLO spreads widen in market sell-off; Seix refinances two CLOs; Buckhead to refinance CDO

By Cristal Cody

Tupelo, Miss., March 16 – CLO spreads are widening in the market turmoil as Americans face school, entertainment and business closings and a mass quarantine to stave off the coronavirus.

The Federal Reserve on Sunday announced an emergency rate cut of 100 basis points, lowering the federal funds target range to 0% to 0.25%.

“The Fed’s further rate cut to counter Covid-19 yesterday is credit positive for many U.S. structured finance sectors, such as mortgage-backed securities and consumer asset-backed securities, because it will increase debt affordability for borrowers and support liquidity and asset prices, among other benefits,” Jian Hu, managing director of Moody’s Investor Service, said in an emailed statement.

“For collateralized loan obligations, although lower short-term rates will decrease excess spread, a credit negative, lower rates will also cut leveraged loan borrowers’ payment obligations and revive dormant Libor floor benefits in CLO weighted average spread, both credit positives,” Hu said.

In the refinancing space, Seix Investment Advisors LLC priced $386.5 million of notes in a refinancing of a vintage 2016 CLO and $410 million of notes in a refinancing of a 2017 CLO.

Buckhead One Financial Opportunities, LLC intends to refinance notes from a 2017 CDO.

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