Carlyle brings U.S., European CLOs; primary spreads softer; CLO secondary demand strong

By Cristal Cody

Tupelo, Miss., Feb. 28 - Carlyle Investment Management LLC priced a $726.5 million collateralized loan obligation transaction on Friday, following the Carlyle Group LP €375 million CLO deal on Monday, according to informed sources.

More than $8 billion of CLOs priced in February, better than the $6.8 billion of volume in February 2013, according to a Wells Fargo Securities, LLC report on Friday.

The more than $10 billion of CLOs priced through the first two months of 2014 fell short of the $15.9 billion brought in the same period last year, the report said.

About $16 billion of CLO transactions are in the pipeline, a source said on Friday.

Coming up in the European CLO market, Intermediate Capital Group plc's €360 million St. Paul's CLO IV Ltd. offering is expected to price in the week ahead, according to a market source.

Primary spreads, especially mezzanine tranches, are "marginally softer," Wells Fargo senior analyst Dave Preston and associate analyst Jason McNeilis said in the note.

Carlyle priced the U.S. AAA tranche at Libor plus 152 basis points, 2 bps wider than other broadly syndicated CLO AAA slices this year, according to an informed source.

In the U.S. CLO secondary market, AAA tranches are unchanged at Libor plus 155 bps, while BBB tranches are flat on the week at Libor plus 405 bps, the Wells Fargo analysts said.

"Demand for secondary CLO paper is strong, especially considering the large increase in primary issuance, which can occasionally lead to slower secondary volumes," the analysts said. "Generally, spreads are slightly tighter in the secondary."

Carlyle prices $726.5 million

Carlyle Investment Management brought $726.5 million of notes due 2026 in the CLO transaction via Morgan Stanley & Co., LLC on Friday, according to an informed source.

Carlyle Global Market Strategies CLO 2014-1, Ltd. priced $5 million of class X senior secured floating-rate notes (Aaa/Expected AAA/) at Libor plus 100 bps and $448 million of class A senior secured floating-rate notes (Aaa/Expected AAA/) at Libor plus 152 bps at the top of the structure.

The CLO also sold $67 million of class B floating-rate notes (/Expected AA/) at Libor plus 210 bps; $64 million of class C floating-rate notes (/Expected A/) at Libor plus 300 bps; $34 million of class D floating-rate notes (/Expected BBB/) at Libor plus 345 bps; $34.5 million of class E floating-rate notes (/Expected BB-/) at Libor plus 445 bps and $74 million of subordinated notes.

Carlyle Investment Management will manage the CLO.

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

Carlyle Investment Management, part of the Washington, D.C.-based Carlyle Group, priced four U.S. CLO transactions in 2013, including the $604.9 million Carlyle Global Market Strategies CLO 2013-1, Ltd. deal, $628 million Carlyle Global Market Strategies CLO 2013-2, Ltd. offering, $516.9 million Carlyle Global Market Strategies CLO 2013-3, Ltd. issue and the $415.21 million Carlyle Global Market Strategies CLO 2013-4, Ltd. vehicle.

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