Fortress refinances fixed-rate CLO notes; strong post-holiday primary action eyed

By Cristal Cody

Tupelo, Miss., Aug. 28 – Fortress Investment Group LLC affiliate FCOD CLO Management LLC refinanced $43.9 million of fixed-rate notes in two tranches from a vintage 2018 middle-market CLO transaction.

CLO managers have refinanced about $26 billion of vintage CLOs year to date, market sources said.

“Refinancing activity has resumed primarily in August after a hiatus since mid-March, but activity is different now compared to then,” Fitch Ratings said in a report on Friday. “Managers are mostly electing to refinance their few fixed-rate tranches as they look expensive compared with all-in costs of variable-rate notes amid the sharp drop in Libor rates.”

Fitch notes there have been at least 13 broadly syndicated loan CLOs that have been refinanced in August.

Meanwhile, new issuance has slowed in August.

“August primary volume has dropped significantly compared to prior months,” Wells Fargo Securities, LLC analysts said in a research note on Friday.

August’s volume to date of $3.9 billion is a 60% drop month over month “and is equal to April issuance – the second lowest issuance month of the year,” the analysts said. “We expect a heavy issuance calendar after Labor Day, as U.S. CLO managers appear keen to issue before the U.S. election in November.”

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