AXA prices; CLO refinancing pickup eyed; loans post first inflow; CBO/CDO/CLOs active

By Cristal Cody

Tupelo, Miss., Jan. 10 – AXA Investment Managers, Inc. priced $404 million of notes in a new broadly syndicated CLO offering set to close later in January.

Meanwhile, hints the CLO refinancing market may open up quickly on tighter spreads are surfacing.

“Should AAA refi spreads settle in the 100 [basis points] area, we expect a pickup in refi activity as equity investors take advantage of lower CLO spreads,” Wells Fargo Securities LLC analysts said in a note on Friday. “However, while the refi window may be opening, many deals will not be able to use this window, due to tight AAA spreads in 2017.”

Based on AAA refinancing spreads of around 100 bps, an estimated $120 billion, or 20%, of U.S. broadly syndicated CLO volume would have AAA’s “in the money” for a reprint based on data from Intex, the analysts said.

A CLO is estimated to be “in the money” for a AAA refinancing when AAA refinancing spreads are 15 bps to 20 bps tighter than the current deal’s AAA coupon, the analysts said.

Overall callable CLO volume will increase by 45% to $440 billion in the second and third quarters of 2020, due to high new issue volume in 2018, according to the report.

“However, most 2018 vintage CLOs have AAA spreads inside of 120 bps,” the analysts said.

Currently, new issue AAA spreads are recorded on average at Libor plus 130 bps, while AAAs in the refinancing space are in the Libor plus 101 bps average area, according to the note.

CLO AAA-rated tranches are trading in the Libor plus 115 bps area in the secondary market.

In other action, leveraged loans posted the first inflow since February 2019 in the past week ended Wednesday, according to a BofA Securities, Inc. global research note released Friday.

Inflows to loans totaled $470 million, compared to a $370 million outflow a week earlier.

AXA brings $404 million

AXA Investment Managers priced $404 million of notes due Jan. 19, 2033 in the Allegro CLO XI, Ltd./Allegro CLO XI LLC deal, according to market sources.

At the top of the capital stack, the CLO sold $228.2 million of class A-1a floating-rate notes at Libor plus 139 bps.

Goldman Sachs & Co. LLC was the placement agent.

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

AXA Investment priced two CLOs in 2019.

The Greenwich, Conn.-based asset management firm is a subsidiary of Paris-based AXA Group.

CBO/CDO/CLOs trades

Elsewhere, the securitized secondary market posted strong volume over the first full week of the new year.

Thursday’s session saw $638.58 million of CBO/CDO/CLO issues and $657.49 million of lower-rated issues trade at an average price of 99.20 and 94.50, or weighted average spreads of 99.60 and 92.30, respectively, according to Trace data.

Trading volume on Wednesday included $771.91 million of investment-grade CBO/CDO/CLO paper traded at an average 98.80 price and $317.01 million of lower-rated issues with an 85.60 average print.

In the secondary market on Tuesday, $485.18 million of high-grade issues traded at a 98.90 average price and $200.91 million of non-investment-grade securities at an average price of 94.50.

On Monday, $494.65 million of CBO/CDO/CLO issues and $216.59 million of non-high-grade securities were traded.

The high-grade paper posted an average price of 98.70, and the lower-rated issues traded at an average 92.10 price.

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