Babson prices $407 million CLO; secondary market ticks up in October, slips in November

By Rebecca Melvin

New York, Jan. 14 – Pricings in the CLO primary market have resumed this week after a hiatus lasting a week or so past the new year. Babson Capital Management LLC priced $407 million of notes in the firm’s first new U.S. collateralized loan obligation deal, and as previously report Voya Alternative Asset Management LLC is in the CLO deal pipeline with a $506.65 million offering.

Babson CLO 2016-I Ltd./Babson CLO 2016-I LLC sold $2.5 million of class X floating-rate notes at three-month Libor plus 100 basis points; $248 million of class A floating-rate notes at Libor plus 150 bps, $31 million of class B-1 floating-rate notes at Libor plus 230 bps, and $16 million of 4.2% class B-2 fixed-rate notes.

The CLO also priced $26.5 million of class C floating-rate notes at Libor plus 325 bps; $24.5 million of class D floating-rate notes at Libor plus 385 bps; $22 million of class E floating-rate notes at Libor plus 655 bps and $36.5 million of subordinated notes.

The notes mature in April 2027. There is a two-year non-call period that ends in April 2018 and a four-year reinvestment period that ends in April 2020.

Morgan Stanley & Co. LLC was the placement agent.

The pricings follow on from where Venture XXII CLO, Ltd./Venture XXII CLO LLC left off on Dec. 23 with its $222 million of class A-1L floating-rate notes at Libor plus 150 bps, $15 million of 3.22% class A-1F fixed-rate notes and $20 million of class A-2 floating-rate notes at Libor plus 180 bps at the top of the deal structure.

The Venture XXII CLO was arranged by Jefferies LLC and New York-based MJX Asset Management is manager of the deal.

In the secondary market, CLO portfolio loan trading by volume ticked up in October in opposition to the general trend in which the trajectory of CLO portfolio loan trading volume was downward since May, according to analysis published this week by Wells Fargo Securities.

In October, there was $6.4 billion of loans bought and $4.1 billion of loans sold for a total of loans traded of $10.5 billion. The level tracked lower in November when $5.1 billion of loans were bought and $3.4 billion were sold for a total of $8.5 billion. The November level was the lowest since January 2015 when $7.6 billion traded.

The peak trading volume of CLO portfolio loans in 2015 occurred in May and June, when $14.8 billion and $14.7 billion traded, respectively.

The median price for loans in October and November were the lowest in more than six month. The November median buy price was $99, up from $98.9 in October, but down from $99.8 in May, June and July. The median sale price in November was $99.3, which was down from $100 in May and July, according to the Wells Fargo CLO Portfolio Trading Blotter published Tuesday.

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