AIG prices $508 million CLO; October primary market active; CLO BB tranches widen

By Cristal Cody

Tupelo, Miss., Oct. 22 – AIG Asset Management (EU) CLO LLC priced $508 million of notes in the manager’s second broadly syndicated CLO deal of the year.

The U.S. primary market continues to be active with five new deals and five refinancing transactions priced over the past week, bringing year-to-date supply to $92 billion and refinancing volume to $39 billion, according to a BofA Merrill Lynch research note released Monday.

Several deals are in the pipeline with October expected to see dollar-denominated supply of at least $9 billion, the note said.

In the secondary market, BWIC volume totaled $725 million last week, with activity mostly seen in CLO AAA and AA tranches. CLO AAA through A spreads widened 5 basis points to 10 bps, while lower mezzanine tranches softened 25 bps to 50 bps over the past week, according to the report.

“CLO performance often lags that of the leveraged loan market, which has seen pricing conditions deteriorate in the past couple of weeks before stabilizing this week,” BofA Merrill Lynch analysts said.

CLO BB tranches have seen a sell-off in October with spreads widening as loan prices dropped, Wells Fargo Securities LLC analysts Dave Preston and Powell Eddins said in a note on Monday.

“New issue BB spreads are at least 25 bps wide of the levels of late July, and 15-25 bps wider than September 20,” the Wells Fargo analysts said.

“The dollar price of CLO BBs in the secondary market has now fallen below 92 – lower than the 93 level in late 2018,” the analysts said. “Tranches further up the capital stack have not followed suit: while they are certainly weaker month-over-month, DMs and dollar prices for single-As and BBBs remain firmer than levels seen last November.”

BBs are pricing in October on average in the Libor plus 725 bps area and trading at an average Libor plus 775 bps area in the secondary market, the Wells Fargo note said.

CLO AAAs are printing in the Libor plus 134 bps area on average, while trading at a Libor plus 125 bps average in the secondary market.

AIG brings 2019-2 CLO

AIG Asset Management (EU) CLO priced $508 million of notes due Oct. 25, 2032 in the AIG CLO 2019-2, Ltd./AIG CLO 2019-2, LLC transaction, according to market sources.

In the AAA-rated tranche, AIG CLO 2019-2 sold $310 million of class A floating-rate notes at Libor plus 136 bps.

Morgan Stanley & Co. LLC was the placement agent.

AIG Asset Management (EU), a relying adviser to AIG Asset Management (U.S.) LLC and a subsidiary of American International Group, Inc., will manage the CLO.

The notes are collateralized mainly by broadly syndicated first-lien senior secured loans.

The finance and insurance company is based New York.

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