CLO market action slows on pandemic; Elmwood prices; Benefit Street, Mariner refinance

By Cristal Cody

Tupelo, Miss., March 13 – CLO primary market activity slowed in response to disruptions caused by the coronavirus, while the secondary market has been active this week.

CLO managers’ business continuity plans may be implemented during the pandemic, Fitch Ratings said in a report on Friday.

“Fitch recently polled a group of select managers in elevated virus-exposure regions and found that, while none had yet to formally initiate work-from-home procedures at that time, most were at least contemplating it and have been preparing with system tests and/or rotational absences,” Fitch said.

The financial markets improved on Friday with equities recovering most of Thursday’s losses after U.S. president Donald Trump declared a national emergency regarding the coronavirus and outlined new measures.

Looking at the structured finance market, Fitch said that it “does not currently expect disruption from the coronavirus to create negative rating risk in any global structured finance sector as long as the economic stress remains temporary and economic activity recovers relatively quickly.”

Fitch said that a majority of its structured finance transactions are ranked with moderate asset-performance vulnerability, including RMBS, consumer and timeshare asset-backed securities and CLOs based in most countries.

In CLO primary market activity, details emerged on a new issue and two refinancing transactions.

Elmwood Asset Management LLC priced $506.7 million of notes in a new broadly syndicated CLO.

Benefit Street Partners LLC refinanced $450 million of notes in two tranches from a vintage 2017 broadly syndicated CLO.

Mariner Investment Group, LLC priced a $440 million second refinancing of vintage 2016 broadly syndicated CLO notes.

In other activity on Friday, Investcorp Credit Management US LLC closed on its previously reported $408.05 million new issue Jamestown CLO XV, Ltd. deal.

The CLO priced $256 million of the class A floating-rate notes at Libor plus 134 basis points.

Elsewhere, secondary trading volume has topped $1 billion in each of the previous two sessions for investment-grade CBO/CDO/CLO securities, Trace data shows.

On Thursday, $1.09 billion of high-grade paper traded, along with $164.46 million of lower-rated issues.

The high-grade securities traded at an average price of 94.80 and a weighted average price of 95.

The non-high-grade paper traded at a 78.10 average price and 79.80 weighted average price.

On Wednesday, $1.33 billion of investment-grade CBO/CDO/CLO securities traded at an average price of 96.90 and a weighted average price of 97.50.

The session also included $409.47 million of lower-rated issues traded at a 79.60 average price and a 75 weighted average price.

Elmwood taps market

Elmwood Asset Management priced $506.7 million of notes due April 15, 2033 in the new offering, according to market sources.

Elmwood CLO IV Ltd. sold $320 million of class A floating-rate notes at Libor plus 124 bps at the top of the capital structure.

BofA Securities, Inc. was the placement agent.

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

Elmwood Asset Management is a New York-based hedge fund created in 2018.

Benefit Street refinances

Benefit Street Partners priced $450 million of notes due April 2029 in the refinancing, according to a market source.

Benefit Street Partners CLO XI Ltd./Benefit Street Partners CLO XI LLC sold $387 million of class A-1-R senior secured floating-rate notes at Libor plus 102 bps and $63 million of class A-2-R senior secured floating-rate notes at Libor plus 150 bps.

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

The original $608.1 million deal was issued April 27, 2017.

The CLO is collateralized entirely by first-lien senior secured loans.

New York City-based Benefit Street Partners is a credit investment arm of Providence Equity Partners LLC.

Mariner prices $440 million

Mariner Investment Group sold $440 million of notes due July 23, 2029 in its refinancing transaction, according to a market source.

Mariner CLO 2016-3 Ltd./Mariner CLO 2016-3 LLC sold $315 million of class A-R2 floating-rate notes (AAA) at Libor plus 99 bps in the AAA-rated tranche.

Citigroup Global Markets Inc. was the refinancing agent.

Mariner originally issued the $503.4 million CLO on Aug. 11, 2016 and first refinanced the notes on July 24, 2017.

The alternative asset management firm is based in New York City.

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