CLO market participants boarded planes to the ABS East conference in Miami after a strong week of issuance, with 31 deals priced across the US and Europe.
In the US, arrangers priced 25 deals, including 13 resets and refis. In Europe, six deals were priced, two of them resets.
In Europe, Onex and Palmer Square bagged the tightest double-B CLO spreads so far this year at 580bp over three-month Euribor and pushed prices further in from last week’s tightening.
European business
JP Morgan was the arranger of Onex’s OCP Euro CLO 2024–11. The deal size was significantly increased from €408m at launch to €510m at pricing. It had a relatively long non-call period of two years and a reinvestment period of 4.5 years. BNP Paribas was a co-placement agent on the deal.
JP Morgan also priced a €452m static CLO for Palmer Square, the manager’s third static deal of the year.
And on Friday, CVC completed its €437m Cordatus Loan Fund XXXIII with BNP Paribas as arranger.
Onex and CVC both achieved triple-A spreads of 129bp, pushing the market back under the 130bp mark. With a few exceptions, it had been stuck at that level since late July, partly due to heavy supply.
In the US, the tightest triple-A pricing was 134bp over Sofr, achieved by Neuberger Berman for its $320m CLO 58 and Blackstone’s $248m Hamlin Park CLO, both new issues.
No one replicated last week’s Oak Hill reset, which priced at 133bp.
Secondary steady
Secondary spreads remained unchanged across tranches on both sides of the Atlantic.
“One of the things I like about primary is the long reinvestment period,” an investor told GlobalCapital. “I don’t think we’ll have a spike in defaults in the coming months, but in 12 to 24 months, I don’t know.”
The investor echoed the sentiment of other market participants, who said the mood at the European CLO Summit two weeks ago was less bullish than at Global ABS in June.
“It feels like more mixed feelings now, although the pipeline is full and we keep on trading,” the investor added.
Ares priced the reset of its European CLO XIV at 103bp, with Goldman Sachs as the arranger.
The deal showed the broadening scope of resets in the European market. The tight spread was achieved because the CLO exited its reinvestment period in October 2023, so now is essentially static.
As with issuers of static deals, Ares opted to secure ratings from Moody’s and Fitch instead of S&P and Fitch, which are the most common combination of agencies for European new issue deals. It has a non-call period of one year.
Middle market
Last week also brought significant news about using CLOs as tools to fund direct lending.
In Europe, Barings opened a warehouse for the first European middle market CLO. In the US, KKR entered the middle market by pricing KIMM CLO I with BNP Paribas.
KIMM CLO I’s triple-A tranche landed at 163bp over Sofr, just 5bp wider than the most recent middle market new issue by Ares, which priced at 158bp on October 10.
Managers have a narrow window to get their deals across the line, between ABS East, which is running October 21-23 and the US elections on November 5, but the pipeline continues to refill.
In the US, arrangers are marketing 40 deals, according to Kopentech, including a debut CLO by Obra, an alternative asset manager with $4.9bn of assets under management. The triple-A and double-A tranches of Obra’s CLO have been pre-placed.
On the European side, GlobalCapital is aware of at least 18 deals in preparation for the next few weeks.