Carlyle prices $408.25 million CLO; new issue, refinancing markets remain active

By Cristal Cody

Tupelo, Miss., Sept. 24 – In new CLO issuance, Carlyle CLO Management LLC priced $408.25 million of notes in the manager’s third new offering of the year.

Primary action has picked up in September in both the new issue and refinancing markets, sources said.

About $84 billion of new CLOs have priced year to date, while more than $119 billion of vintage CLOs have been refinanced in 2018.

New issue spreads weighed on CLO bid levels in the secondary market with thin trading over the past week, according to a BofA Merrill Lynch note released on Monday.

“Secondary spreads inched higher across the stack, although the widening was clearly more significant at the bottom of the stack,” the analysts said. “While this is the fourth consecutive week BBBs and below saw wider spread levels [week over week], AAs and As widened for the first time since mid-August.”

CLO spreads eased about 3 basis points to 25 bps across the capital structure over the past week.

AAA-rated spreads ended Friday 3 bps wider on the week on average at the Libor plus 110 bps area, while BBB tranches eased 10 bps to the Libor plus 305 bps average area, according to the report.

In other activity on Monday, the Canada Pension Plan Investment Board announced that subsidiary CPPIB Credit Investments Inc. will broaden its portfolio through new investments in equity tranches of CLOs.

“CPPIB Credit’s initial partnership in CLO equity investing will be with Sound Point Capital Management, LP, a New York-based credit-focused asset manager,” according to a news release. “CPPIB Credit will invest $285 million in a newly established investment vehicle used to purchase equity in Sound Point’s CLOs over the next several years.”

Sound Point Capital has priced two new CLOs year to date, including the $810.25 million Sound Point CLO XX, Ltd. transaction in June. The CLO manager placed four new CLOs and refinanced eight vintage CLOs in 2017.

“Since the popularization of cash-flow CLOs in the early 2000s, historical performance of CLO equity tranches has been favorable compared to that of subordinated tranches of other structured credit asset classes,” the Canada Pension Plan Investment Board release said. “CLO investments help to diversify CPPIB’s portfolio in pursuit of better risk-adjusted returns when compared to traditional fixed income and equities.”

John Graham, senior managing director and global head of credit investments at CPPIB, said the company plans to identify more potential offerings for “this multi-manager CLO equity strategy.”

Carlyle brings 2018-3 deal

Carlyle CLO Management priced $408.25 million of notes due Oct. 15, 2030 in the Carlyle U.S. CLO 2018-3 Ltd./Carlyle U.S. CLO 2018-3 LLC offering, according to a market source.

The CLO sold $244 million of class A-1a senior secured floating-rate notes and $18 million of class A-1b senior secured floating-rate notes at a weighted average discount margin of Libor plus 115 bps.

Morgan Stanley & Co. LLC was the placement agent.

Carlyle has priced three new dollar-denominated CLOs year to date.

The CLO manager sold two new U.S. CLOs and refinanced five vintage U.S. CLOs in 2017.

The asset management firm is an affiliate of Washington, D.C.-based Carlyle Group.

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