Anchorage Capital brings CLO; AAAs 'anchored' at 150 bps; mezzanine tranches better

By Cristal Cody

Tupelo, Miss., Feb. 21 - Anchorage Capital Group, LLC came by with a $517.75 million CLO deal and priced the AAA tranche at Libor plus 150 basis points, in line with other issuance brought in 2014, according to market sources on Friday.

Triple-A rated CLO tranches "are essentially unchanged from 2012 levels," Barclays analysts said in a note on Friday.

AAA-rated CLOs priced at Libor plus 147 bps on average in 2012, according to Barclays.

CLO AAA spreads tightened to as much as Libor plus 110 bps in the first quarter of 2013 before widening the rest of the year.

Mezzanine tranches have come in more than 100 bps over the past two years, Barclays said.

BBB-rated tranches have priced on average at Libor plus 346 bps in 2014, compared to Libor plus 458 bps in 2012, according to the note.

New BB-rated tranches have tightened to the Libor plus 463 bps area this year from Libor plus 571 bps in 2012.

B-rated slices are better at Libor plus 541 bps, compared to Libor plus 702 bps for new issuance in 2012, according to Barclays.

Year-to-date CLO issuance of $7.4 billion remains below expectations with many analysts lowering their 2014 deal forecasts, according to market sources.

Nearly $16 billion of CLO deals are in the pipeline, sources said.

"While we expected a modest decline in issuance, as AAA spreads remain anchored at 150 bps, the new issue market is waiting for more clarity on the definition of covered funds in the Volcker Rule before ramping up," Barclays said.

Some sources report they are staying on the sidelines of the CLO market and focusing on other spaces until further information emerges on the Volcker Rule, which prohibits banks from owning CLOs that hold bonds.

"We need clarity before we can proceed," one source said.

Anchorage Capital prices

CLO manager Anchorage Capital Group priced $517.75 million of notes due April 28, 2026 in the deal via BofA Merrill Lynch, according to a market source.

Anchorage Capital CLO 3, Ltd./Anchorage Capital CLO 3, LLC sold $300 million of class A-1 senior secured floating-rate notes (Aaa//AAA) at Libor plus 150 bps, $45.25 million of class A-2a senior secured floating-rate notes (Aa2) at Libor plus 225 bps; $21 million of 4.45% class A-2b senior secured fixed-rate notes (Aa2); $24 million of class B senior secured deferrable floating-rate notes (A2) at Libor plus 300 bps; $36.25 million of class C senior secured deferrable floating-rate notes (Baa3) at Libor plus 350 bps; $30.5 million of class D secured deferrable floating-rate notes (Ba3) at Libor plus 475 bps; $12.75 million of class E secured deferrable floating-rate notes (B3) at Libor plus 550 bps and $48 million of subordinated notes.

Proceeds from the deal will be used to repay interim financing and to purchase assets for a target portfolio of about $500 million of primarily leveraged loans.

New York City-based Anchorage Capital was last in the market in 2013 with the $412 million Anchorage Capital CLO 2013-1, Ltd./Anchorage Capital CLO 2013-1, LLC offering.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.