CSAM, Neuberger Berman, BlackRock price CLOs; JPMorgan cuts forecast; secondary active

By Cristal Cody

Eureka Springs, Ark., Feb. 29 – Four new CLO deals priced in February, but market participants expect volume to remain light over the coming months.

Credit Suisse Asset Management, LLC priced a $504.9 million CLO deal.

Neuberger Berman Fixed Income LLC sold $361.5 million of notes in its new CLO offering.

BlackRock Financial Management, Inc. priced a $498.75 million U.S. dollar CLO.

BlackRock Investment Management (UK) Ltd. was in the European market on Feb. 10 with the €410,238,000 BlackRock European CLO I Designated Activity Co. deal.

Crestline Denali Capital, LP also priced the $359 million Denali Capital CLO XII, Ltd./Denali Capital CLO XII LLC offering via BNP Paribas Securities Corp.

Despite the latest deals, volume remains low year over year.

U.S. CLO issuance totals $3.4 billion in eight new deals year to date.

J.P. Morgan Securities LLC analysts dropped their fiscal 2016 CLO volume forecast by 40% to $35 billion to $45 billion.

“In terms of supply, this year has gotten off to a start comparable to 2012, which saw $55 [billion] in total issuance,” the analysts said in a market note.

JPMorgan analysts also revised their primary U.S. CLO AAA mid-2016 spread forecast to the Libor plus 160 basis points to Libor plus 170 bps range from a Libor plus 155 bps to 160 bps spread estimate.

“We see little impetus for tightening as selling pressures based on negative technical dynamics persist and credit stress picks up,” the analysts said.

Issues affecting CLO supply remain, including risk retention, challenging arbitrage, credit conditions, equity price volatility and a mezzanine/equity buyer base “suffering from ‘buyer fatigue’ after a difficult 2015 and a rough start to 2016,” according to the note.

BofA Merrill Lynch lowered its 2016 CLO supply forecast earlier in the month to $45 billion. The firm forecasts about €15 billion of European CLO issuance with some deals expected on the horizon.

“The European CLO primary market has been slow so far in 2016, with two deals pricing so far,” the analysts said in a market note.

BofA Merrill Lynch analysts said “numerous warehouses are reportedly open, and some deals are at the marketing stage. Without an improvement in market conditions however, we expect the primary market to remain slow.”

Secondary activity rises

Secondary market activity rose over the previous week with BWIC volumes of nearly $600 million, according to BofA Merrill Lynch.

“Significant tiering by manager and portfolio compositions remains especially in the mezzanine tranches,” the BofA Merrill Lynch analysts said. “US CLO 2.0/3.0 spreads are at about 185, 275, 400, 650, 1200 and 1550 which are 25, 75 and 100 [bps] wider from BBB-B week over week.”

In the European CLO secondary market, more than €100 million was on BWIC lists.

“Single A, BBB and BB bonds are currently trading at spreads around the 400s, 500s and 800s respectively,” the analysts said.

CSAM prices $504.9 million

Credit Suisse Asset Management priced $504.9 million of notes due March 15, 2027 in the Madison Park Funding XX Ltd./Madison Park Funding XX LLC transaction, according to a market source.

The CLO sold $310 million of class A senior secured floating-rate notes (Aaa/AAA) at Libor plus 155 bps in the senior tranche.

J.P. Morgan Securities LLC was the placement agent.

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

Credit Suisse Asset Management priced four U.S. CLO deals and refinanced one vintage CLO transaction in 2015.

The New York-based investment manager is a unit of Credit Suisse Group AG.

Neuberger Berman prices

Neuberger Berman Fixed Income sold $361.5 million of notes due April 20, 2027 in a new CLO deal, according to a market source.

Neuberger Berman CLO XXI, Ltd./Neuberger Berman CLO XXI, LLC priced $223.2 million of class A senior secured floating-rate notes at Libor plus 155 bps at the top of the capital structure.

Morgan Stanley & Co. LLC was the placement agent.

The transaction is backed primarily by broadly syndicated senior secured loans.

Neuberger Berman Fixed Income was in the CLO primary market with two transactions in 2015.

The Chicago-based firm is part of Neuberger Berman Group, LLC.

BlackRock brings CLO

BlackRock Financial Management priced a $498.75 million CLO deal, according to a market source.

Magnetite XVII, Ltd./Magnetite XVII LLC sold $320 million of class A senior secured floating-rate notes at Libor plus 155 bps in the senior tranche.

Deutsche Bank Securities Inc. arranged the offering.

BlackRock priced four CLOs and refinanced one vintage 2012 CLO in 2015.

The investment management firm is based in New York City.

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