Latest news
Latest news
Lower pricing across CLO capital structure does little to improve equity arbitrage
Manager tightens triple-A pricing by 27bp and avoids refinancing some junior mezzanine notes
Spread on triple-A rated notes 4bp wide of recent tights
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Speakers at the IMN Investors’ Conference on European CLOs and Leveraged Loans, held in London on Wednesday, said that “covenant lite” loans in CLOs are not yet a problem for the market, but warned the audience that recovery rates have yet to be truly tested. -
The global CLO investor base is becoming increasingly fluid, with US, European and Japanese investors moving between markets based on relative value and credit quality with greater ease, attendees at the IMN Investors’ Conference on European CLOs and Leveraged Loans heard on Wednesday.
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Issuance of US CLOs reached record levels in the first quarter of the year, but the number of new deals paled in comparison to refinancing and resets of legacy transactions.
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CLO managers have been forced to endure a wave of term loan B repricings from energy sector obligors in the first quarter of the year, as demand for leveraged loans allows borrowers to refinance at more attractive levels.
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Boutique CLO shop Spire Partners is looking to refinance its first CLO, shortly after closing its third deal earlier in March.
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The primary US CLO market is moving in fits and starts in 2017, with managers again pumping the brakes in the last week. But according to JP Morgan research, over 200 legacy CLOs could still be refinanced, giving managers plenty to do in the coming months.
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Buyers of CLO mezzanine debt are pushing back against the rapid spread compression seen since since the start of the year, with activity over the past month showing a slowdown in the pace of tightening.
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Looming macro risks and political turmoil could weigh on loan prices, potentially easing the squeeze on CLO equity investors at the bottom of the capital structure, said analysts at Prytania Investment Advisors this week.
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Spire Partners set a new tight level for new issue European CLOs last Friday, as triple-A spreads continued to rally and spreads at the junior end of the capital stack also show signs of tightening.
