West Gate sells AAA tranche at Libor plus 130 bps; CLO spreads hold; secondary light

By Cristal Cody

Tupelo, Miss., Aug. 13 - West Gate Horizons Advisors, LLC sold $402.65 million in its first post-financial crisis collateralized loan obligation offering, while other CLO managers are expected to bring deals ahead of the Labor Day holiday, according to market sources on Tuesday.

European CLO issuance also is gaining, with total 2013 transactions expected to break initial forecasts of about €5 billion, sources said.

New European CLO issue volume stands at about €4 billion following deals priced the previous week from 3i Debt Management Investments Ltd. and Haymarket Financial LLP.

"There was little summer lull on the European CLO new issue front, with three deals priced in July and two more in the beginning of August," Morgan Stanley & Co. LLC analysts said in a note.

U.S. CLO primary issuance slowed in July, but the calendar is expected to pick up with nearly $13 billion of CLO transactions in the pipeline, sources said. More than $49 billion of CLOs have priced year to date.

West Gate Horizons Advisors sold the $242.5 million Aaa-rated tranche at Libor plus 130 basis points, tighter than recent deals pricing the class A slice at Libor plus 135 bps, sources said.

Sound Point Capital Management LP's recently brought $420.75 million Sound Point CLO III, Ltd. offering, set to close on Aug. 22, included a $248 million tranche of class A senior floating-rate notes (Aaa//AAA) priced at Libor plus 135 bps.

CLO spreads are holding in the mid-130 bps range for triple A-rated notes, according to market sources.

"Spread buyers, banks, for example, are more likely to find CLOs a better relative value proposition," the Morgan Stanley analysts said.

Secondary CLO market volume remains light, according to a market source.

West Gate prices CLO

West Gate Horizons Advisors' CLO included eight tranches of notes due Aug. 13, 2025, according to market sources.

The Ocean Trails CLO IV/Ocean Trails CLO IV LLC priced $2.65 million of class X floating-rate notes (Aaa) at Libor plus 100 bps; $242.5 million of class A floating-rate notes (Aaa) at Libor plus 130 bps; $51 million of class B floating-rate notes at Libor plus 225 bps; $25.75 million of class C deferrable floating-rate notes at Libor plus 300 bps; $20.25 million of class D deferrable floating-rate notes at Libor plus 400 bps; $16.5 million of class E deferrable floating-rate notes at Libor plus 530 bps; $8 million of class F deferrable floating-rate notes at Libor plus 590 bps and $36 million of subordinated notes.

Nomura Securities International, Inc. was the underwriter.

West Gate Horizons will mange the CLO, which is securitized by a broadly syndicated loan portfolio.

The offering is set to close on Aug. 29.

West Gate Horizons Advisors is an investment adviser firm based in Los Angeles.

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