CLO action quiet; deals on horizon; ‘clean new issue’ likely if risk appetite returns

By Cristal Cody

Tupelo, Miss., Feb. 12 – The U.S. CLO primary market remains mostly quiet with some issuance expected over the coming weeks, according to informed sources.

Two U.S. broadly syndicated CLO deals totaling $826 million have priced year to date, according to Prospect News data.

“The Performing Loan Index price is now just above $91, but this reflects a bifurcated market of ‘haves’ and ‘have nots,’” Barclays analysts said in a note on Friday. “A clean loan portfolio, excluding commodities, second liens, loans under $85, and those rated B3 or lower, would have an average price of $96.6. This is still a good discount and could be sufficient to make a ‘clean’ new issue CLO possible if the appetite for equity and mezzanine risk returns.”

CLO managers own about half of the loan market, the analysts note.

Coming up in the deal pipeline, Prudential Investment Management, Inc. plans to price $507.75 million of notes in the Dryden 42 Senior Loan Fund/Dryden 42 Senior Loan Fund LLC deal via BNP Paribas Securities Corp.

CreekSource LLC is in the deal pipeline with the $300 million Mill Creek CLO II, Ltd./Mill Creek CLO II LLC transaction. Goldman Sachs & Co. is the placement agent.

NewStar Financial, Inc. is marketing the year’s first small-to-middle enterprise CLO deal.

NewStar intends to sell $348.05 million of notes in the NewStar Commercial Loan Funding 2016-1 LLC deal. Wells Fargo Securities, LLC is the underwriter.

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