CLO primary quiet, refinancing action takes shape; secondary market volume thin; spreads flat

By Cristal Cody

Tupelo, Miss., Jan. 8 – CLO market action has remained light so far in 2018, but one issuer has refinanced a vintage CLO, according to informed sources.

BMO Asset Management Corp. refinanced and reset the Great Lakes CLO 2015-1, Ltd. transaction, which originally was issued July 30, 2015. Citigroup Global Markets Inc. was the refinancing bookrunner.

Proceeds will be used to redeem the original class A-1, A-2, B, C, D, E and F notes on Jan. 16.

Additional pricing details were not immediately available.

The market saw a record $164 billion of refinancing and reset volume in 2017.

BofA Merrill Lynch analysts forecast 2018 new issue volume of $110 billion with another $85 billion of refinancing and reset volume, comprised mostly of 2015 and 2016 vintage CLOs, according to a research note released on Monday.

In the secondary market, spreads ended the first week of the year flat across the capital stack, BofA Merrill Lynch analysts said in the note. CLO 2.0 AAAs in general were unchanged at Libor plus 100 basis points, while B-rated spreads were flat at Libor plus 725 bps.

“With the first trading week of 2018 cut short by the January 1st holiday and hampered by a winter storm on the east coast, weekly U.S. CLO BWIC volume was very low at $54 [million],” the analysts said. “The primary market was similarly quiet, with no new-issue deals pricing this week. Given a robust primary pipeline for 1Q18, however, we expect activity will pick up soon and that spreads will largely grind tighter given strong investor appetite.”

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