Oaktree, Acis price first CLO transactions of 2014; AAA notes widen; mezzanine notes firm

By Cristal Cody

Tupelo, Miss., Jan. 17 - The collateralized loan obligation market saw the year's first issuance with two new deals from Oaktree Capital Management, LP and Acis Capital Management, LP, according to informed sources on Friday.

Oaktree Capital Management priced $516.5 million of notes in the Oaktree CLO 2014-1 Ltd./Oaktree CLO 2014 LLC offering, while Acis Capital Management sold a $416.75 million CLO.

The pipeline includes $13.9 billion of broadly syndicated and middle market CLO transactions, according to an informed source.

Although new deals are structuring to comply with the Volcker Rule, issuance for the rest of January could be delayed until clarification emerges for bank ownership of AAA notes, one source said on Friday.

"Until it's clear, you probably won't see many deals," the source said.

Federal agencies announced on Tuesday an interim rule to permit banks to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities but did not address questions regarding bank ownership of CLO AAA tranches. Banks may not hold CLOs that hold debt securities under the rule issued on Dec. 10.

The lack of clarity has pushed AAA spreads slightly wider, according to a Wells Fargo Securities, LLC report on Friday from Dave Preston, senior analyst, and Jason McNeilis, associate analyst.

"Although new deals will have mechanisms for Volcker compliance, many investors are waiting for clarity," the note said. "Investors fear buying in the primary, only to have an adverse ruling push secondary spreads meaningfully wider."

AAA notes have eased 5 basis points over the past month to Libor plus 155 bps, according to the report.

Mezzanine tranches continue to tighten, market sources said.

BBB spreads have firmed 25 bps to Libor plus 400 bps from a month ago, while BB-rated notes have come in 40 bps to Libor plus 585 bps, according to the Wells Fargo analysts.

"Mezzanine tranches have been well bid," the analysts said. "In fact, the market absorbed a large amount of 1.0 mezzanine tranches early this week."

Oaktree prices

Oaktree Capital Management priced $516.5 million of notes due February 2025 via Citigroup Global Markets Inc. on Friday, according to parent company Oaktree Capital Group, LLC and an informed source.

The Oaktree CLO 2014-1 offering was expected to include $310 million of class A-1 floating-rate notes (Aaa/AAA/); $70 million of class A-2 floating-rate notes (/AA/); $35 million of class B floating-rate notes (/A/); $25 million of class C floating-rate notes (/BBB/); $22 million of class D floating-rate notes (/BB/) and $54.88 million of subordinated notes.

Final pricing terms were not available by press time.

Oaktree Capital Management will manage the CLO, which is backed by broadly syndicated first-lien senior secured loans and eligible investments.

The CLO has a non-call period that ends in February 2016 and a reinvestment period that ends in February 2018.

The CLO will invest in corporate leveraged loans, Oaktree Capital Group said in a news release.

Oaktree Capital Management was last in the market in June with the $655.18 million Oaktree Enhanced Income Funding Series III Ltd. deal.

Oaktree Capital Management is a Los Angeles-based asset management firm.

Acis sells $416.75 million

Acis Capital Management sold $416.75 million of notes in the Acis CLO 2014-3 Ltd. offering, an informed source said on Friday.

Jefferies LLC arranged the deal.

Final pricing terms were not available by press time.

Acis Capital Management, an affiliate of Dallas-based Highland Capital Management, LP, will manage the CLO.

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