AXA Investment, Ares Management in deal pipeline; non-compliant paper wider in secondary

By Cristal Cody

Tupelo, Miss., July 24 – New primary action is expected in the U.S. and European markets, while secondary trading has been affected by the Volcker Rule, which went into effect earlier in the week, sources said on Friday.

AXA Investment Managers, Inc. is set to price a €362.3 million CLO deal, while Ares Management LLC is marketing an $813.6 million offering.

In the secondary market, non-Volcker compliant spread levels were about 15 basis points to 20 bps wider of compliant AAAs after trading in line in early spring, according to a Barclays Bank PLC report on Friday.

The regulations for banks to conform went into effect on Tuesday. The Volcker Rule prohibits banks from holding ownership interests in covered funds, such as hedge funds, private equity funds and CLOs that are commonly structured as 3(c)(7) funds.

“The CLO secondary market has been affected by the looming law in recent months, as non-compliant supply swamped the market,” Barclays analysts said in the note.

“Secondary market selling of non-compliant AAAs, which we define as non-“Volckerized” 1.0 and early 2.0 paper (2012 and 2013 vintage), increased significantly in the past few months, hitting its apex in June at more than $2 [billion].”

Ares Management is in the U.S. pipeline with an $813.6 million offering of notes due July 29, 2026 in the Ares XXXIV CLO Ltd./Ares XXXIV CLO LLC deal, a market source said.

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