CarVal, Napier Park price CLOs; BlackRock refinances; tighter middle-market AAA spreads eyed

By Cristal Cody

Tupelo, Miss., July 12 – The CLO dollar- and euro-denominated primary markets remain busy, while refinancing action may pick up in the months ahead, according to market sources on Friday.

CarVal CLO Management, LLC priced $504 million of notes in the manager’s second CLO offering of the year.

In European primary action, Napier Park Global Capital Ltd. sold €406.2 million of notes in a new deal.

Meanwhile, BlackRock Investment Management (UK) Ltd. refinanced €360 million of notes from a vintage European CLO.

The BlackRock European CLO II DAC vehicle refinanced the AAA-rated tranche 10 basis points tighter than where it priced in 2016.

Dollar-denominated CLO refinancing activity may pick up, Fitch Ratings said in a report on Friday.

“Based on deals that have priced so far in July, it is likely there will be more easing in the third quarter,” Fitch said. “This will support arbitrage dynamics and could motivate some refinance activity on outstanding deals.”

Broadly syndicated CLO AAA spreads “stabilized” in the second quarter versus the first quarter after more than a year of climbing, according to the report.

The average AAA spread on new and reissued broadly syndicated CLOs averaged 137 bps, nearly unchanged from the first quarter, Fitch said.

“The current spread level is well above last year’s second-quarter average of 106 bps,” Fitch said.

Middle-market CLO AAA spreads averaged at Libor plus 168 bps, down from 175 bps in the first quarter, the report said.

Middle-market spreads are expected “to move lower, based on deals in our pipeline,” Fitch said.

In other activity, outflows for leveraged loans moderated to $300 million in the week ended Wednesday from $510 million in the previous week, according to a BofA Merrill Lynch research note released Friday.

CarVal prices CLO III

CarVal CLO Management priced $504 million of notes due July 20, 2032 in the new CLO offering, according to a market source.

CarVal CLO III Ltd. sold $320 million of class A floating-rate notes at Libor plus 135 bps in the AAA-rated tranche.

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

The offering is collateralized primarily by first-lien senior secured corporate loans.

CarVal CLO Management priced its first CLO offering in 2018.

The CLO manager has priced two new CLOs year to date.

The credit management investment firm is part of Minneapolis-based CarVal Investors, LLC, an independent subsidiary of Cargill, Inc.

Napier Park in primary

Napier Park Global Capital priced €406.2 million of notes due July 15, 2032 in a new European CLO deal, according to a market source.

Henley CLO 1 DAC sold €247 million of the class A senior secured floating-rate notes at par to yield Euribor plus 114 bps.

Citigroup Global Markets Ltd. was the placement agent.

The CLO is backed primarily by broadly syndicated senior secured loans and bonds.

Napier Park Global Capital is an asset management firm based in New York.

BlackRock refinances euro CLO

BlackRock Investment Management (UK) priced €360 million of notes in the BlackRock European CLO II refinancing, according to a market source.

The CLO sold €244 million of the class A-R senior secured floating-rate notes 10 bps tighter than original issuance at Euribor plus 88 bps.

Morgan Stanley & Co. International plc arranged the transaction.

BlackRock Investment Management will continue to manage the CLO.

The CLO manager originally issued €416.5 million of notes due Jan. 15, 2030 in the CLO II offering on Dec. 15, 2016.

The original CLO had priced €244 million of the class A senior secured floating-rate notes at Euribor plus 98 bps.

Proceeds will be used to redeem the outstanding class A-E notes.

The CLO is backed primarily by euro-denominated broadly syndicated senior secured loans and bonds.

BlackRock Investment Management (UK) is a London-based subsidiary of BlackRock, Inc.

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