Barings refinances €506 million 2014 CLO; secondary market volume light; spreads mostly flat

By Cristal Cody

Tupelo, Miss., May 22 – European CLO deal action picked up with new issuance and refinancings, according to market sources on Monday.

Barings (UK) Ltd. priced €506 million of notes in a refinancing and reset of the Babson Euro CLO 2014-2 BV transaction.

In addition, Credit Suisse Asset Management Ltd. priced the new €453 million Cadogan Square CLO IX BV offering, a source said. Final pricing details were not available by press time.

The CLO secondary markets saw light action over the past week due to the political volatility that impacted financial markets, according to a BofA Merrill Lynch report.

The U.S. CLO secondary market had under $200 million of BWIC volume, while the European CLO secondary market saw about €15 million of bonds up for bid, according to the note.

“Mezzanine paper made up the bulk of this week's line items with BB, single-B and equity tranches contributing more than 50% of the total volume,” the analysts said of U.S. activity. “Some Thursday lists were put together after the market turmoil on Wednesday and perhaps pointed to some investors' desire to de-risk their positions. The bids for these bonds were, however, quite strong, and kept spread levels unchanged overall [week over week].”

U.S. AAA-rated spreads ended Friday flat on the week at Libor plus 115 basis points, BofA Merrill Lynch said.

Euro AAAs were 5 bps tighter on the week at Euribor plus 90 bps.

Barings resets CLO

Barings (UK) priced €506 million of notes in a refinancing and reset of the Babson Euro CLO 2014-2 BV transaction, according to a market source.

The CLO priced €297.4 million of class A-1-R senior secured floating-rate notes at Euribor plus 88 bps at the top of the capital structure.

Citigroup Global Markets Inc. arranged the deal.

The maturity on the notes was extended to May 24, 2030 from the original 2027 maturity.

Proceeds will be used to redeem the original notes.

The CLO is backed primarily by European broadly syndicated first lien senior secured obligations.

Barings (UK), formerly Babson Capital Management (UK) Ltd., has refinanced two euro CLOs year to date.

The credit fund management firm is based in London.

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