Sound Point brings $399.32 million CLO; Wells Fargo boosts dollar CLO supply forecast

By Cristal Cody

Tupelo, Miss., June 30 – Sound Point Capital Management LP closed Tuesday on $399.32 million of notes in the manager’s first dollar-denominated broadly syndicated CLO offering priced this year.

Year to date, more than $30 billion of new dollar-denominated broadly syndicated CLOs and over €8 billion of new euro-denominated broadly syndicated CLOs have priced, according to market sources.

Issuance picked up in June after supply came to a standstill in March from the pandemic impact.

On Tuesday, Wells Fargo Securities, LLC analysts raised their dollar-denominated yearly supply forecast to $65 billion from $50 billion.

“We expect spreads to tighten early in Q3, on strong technicals, before widening due to moves in competing sectors, regulatory risk due to the U.S. election, and declining fundamentals,” the analysts said in a note on Tuesday. “We believe the accuracy of forecasts is more uncertain now, as the outcome will be driven by the path of Covid-19, and by central bank support and government reactions.”

CLO AAA spreads are targeted at the Libor plus 180 basis points area, while BB tranches are eyed to be in the 875 bps range by the end of the year, according to the note.

“Our bull case calls for $80 billion of issuance, with AAA spreads at 140 bps and BB spreads of 600 bps,” the Wells Fargo analysts said.

Meanwhile, the secondary market stayed busy in June with $18.7 billion of volume, the second highest monthly total on record, behind March’s record Trace volume of $27.8 billion, according to the note.

Year-to-date secondary volume of $108 billion “is nearly equal to full year 2019 volume” of $110 billion, the analysts said.

Sound Point prints CLO

Sound Point Capital Management closed Tuesday on $399.32 million of notes due July 20, 2030 in the new broadly syndicated CLO offering, according to market sources.

Sound Point CLO XXVI, Ltd./Sound Point CLO XXVI Inc. priced $208 million of class A-1A floating-rate notes at Libor plus 185 bps in the senior tranche.

Citigroup Global Markets Inc. was the placement agent.

The CLO has a one-year non-call period and a two-year reinvestment period.

The New York City-based asset management firm priced a euro-denominated CLO in February.

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