CLO volume light; Neuberger Berman closes deal; Canaccord stops trading CLO tranches

By Cristal Cody

Tupelo, Miss., Nov. 20 – CLO primary action remains light with less issuance forecast in 2016 amid manager consolidation and fewer firms focused on the secondary market, according to sources on Friday.

Risk retention regulations that go into effect in December 2016 are impacting CLO primary activity as CLO managers consolidate, Barclays Bank plc analysts said in a note on Friday.

“Multiple M&A deals have occurred between experienced CLO managers and financial institutions with larger pools of capital, and more are likely to take place in 2016,” Barclays said. “The amount of deals issued by new CLO managers has fallen steeply from prior years – only six new managers have entered the market in 2015, compared with 18 last year and 29 in 2013. Meanwhile, 30 managers that issued CLOs last year have not participated in the market at all in 2015.”

Barclays forecasts $70 billion to $80 billion of CLO issuance in 2016.

In primary activity, details emerged on Neuberger Berman Fixed Income LLC’s $511.25 million CLO transaction that closed on Friday.

Elsewhere in secondary market activity, Canaccord Genuity Inc.’s fixed income division has stopped trading CLO tranches “to focus more on direct lending opportunities,” an informed source said.

About $100 million of CLOs were scheduled to appear on bid lists on Friday, according to a market source.

Neuberger Berman prices

CLO manager Neuberger Berman Fixed Income sold $511.25 million of notes due Jan. 15, 2028 in the Neuberger Berman CLO XX, Ltd./Neuberger Berman CLO XX, LLC deal, according to a market source.

The CLO priced $317.5 million of class A senior secured floating-rate notes at Libor plus 154 basis points in the AAA-rated senior tranche.

Morgan Stanley & Co. LLC was the placement agent.

The transaction is backed primarily by first-lien senior secured loans.

Proceeds from the deal will be used to purchase a portfolio of about $500 million of mostly senior secured leveraged loans.

Neuberger Berman previously was in the market with the $410.15 million Neuberger Berman CLO XIX, Ltd./Neuberger Berman CLO XIX, LLC deal on June 16.

The Chicago-based firm, part of Neuberger Berman Group, LLC, priced three CLOs in 2014.

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