Cent CLO 19 prices $411.4 million; Golub's $556.15 million CLO ahead; BBB spreads better

By Cristal Cody

Tupelo, Miss., Oct. 25 - Primary and secondary action is picking up in the collateralized loan obligation markets, according to informed sources.

"The primary market continues to be active, and deals continue to be done despite the oft-discussed slowdown in AAA demand," Dave Preston, an analyst with Wells Fargo Securities, LLC, said in a note on Friday. "October has already seen more deals done than in September."

More than $5 billion of CLOs have priced in October, compared to a peak this year of $10.7 billion of issuance in March, he said.

About $64 billion of middle-market and broadly syndicated CLOs have priced year to date, sources said on Friday.

Columbia Management Investment Advisors, LLC sold $411.4 million in the new Cent CLO 19 Ltd./Cent CLO 19 Corp. transaction with spreads from Libor plus 133 basis points to Libor plus 495 bps, according to a market source.

Coming up, GC Investment Management LLC is in the deal pipeline with a $556.15 offering, a source said.

About $15 billion of new CLOs are in the pipeline, according to market sources.

The CLO secondary market "has seen increased demand in mid-October, as bonds are well bid throughout the capital structure," Preston said. "Part of this may be due to the fact that CLO spread tightening tends to lag competing assets, and that CLO spreads are now just catching up. Investor sentiment may be more optimistic after the (temporary) resolution of the debt ceiling and government shutdown negotiations."

As of Friday, AAA CLO spreads remain sticky in the 145 bps to 147 bps area, sources said.

BBB-rated spreads mostly are about 10 bps better on the month in the Libor plus 430 bps area.

"AAA CLO spreads have increased nearly 30 [bps] since the April 1 FDIC rule change, while collateral spreads have come down," Barclays analysts said in a note on Friday. "The more challenging arb has slowed CLO creation, which is likely to remain lower until AAA spreads compress."

The FDIC rule change made it more expensive for banks to hold AAA tranches, according to the note.

"Secondary spreads on those tranches have increased to 135 [bps] currently from 108 [bps], and recent structures have printed AAA tranches in the 135-145 [bps] range," Barclays said.

Cent CLO 19 prices

At the top of the capital structure, Cent CLO 19 sold $251.2 million of class A-1a senior secured floating-rate notes (Aaa/AAA/) at Libor plus 133 bps; $10 million of 3.44% class A-1b senior secured fixed-rate notes (Aaa/AAA/); $12.8 million of class A-2a senior secured floating-rate notes (/AA/) at Libor plus 180 bps and $20 million of 4.01% class A-2b senior secured fixed-rate notes (/AA/).

The CLO also priced $38 million of class B senior secured deferrable floating-rate notes (/A/) at Libor plus 325 bps; $20.9 million of class C deferrable floating-rate notes (/BBB/) at Libor plus 330 bps; $17.5 million of class D deferrable floating-rate notes (/BB/) at Libor plus 495 bps and $41 million of subordinated notes.

J.P. Morgan Securities LLC was the underwriter.

The notes are due Oct. 15, 2025.

The investment management firm is based in Boston.

Golub to sell $556.15 million

GC Investment Management plans to bring the $556.15 CLO offering of notes due November 2025 via Citigroup Global Markets Inc., according to a market source.

Golub Capital Partners CLO 17, Ltd./Golub Capital Partners CLO 17 LLC is expected to price five tranches of notes that include $305 million of class A-1 senior secured floating-rate notes (Aaa); $55 million of class A-2 senior secured floating-rate notes (Aa2); $52 million of class B senior secured deferrable floating-rate notes (A2); $23 million of class C mezzanine secured deferrable floating-rate notes (Baa2) and $121.15 million of subordinated notes.

The deal is set to close on Nov. 15.

The CLO manager is an affiliate of New York-based middle market lender Golub Capital.

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