3i Debt prices €413.9 million CLO; BBBs remain weak in secondary market, AAs, As ‘stickier’

By Cristal Cody

Tupelo, Miss., Oct. 16 – 3i Debt Management Investments Ltd. brought the month’s first euro-denominated CLO deal, brining year to date issuance to nearly €20 billion, according to a market source and Prospect News data.

3i Debt priced €413.9 million of notes in the CLO offering.

In the CLO secondary market, BBB-rated tranches remained soft over the week.

CLO BBB spreads have widened 40 basis points to 50 bps since mid-September, while BB spreads have widened 100 bps, Wells Fargo Securities LLC analysts said in a note on Friday.

“AA and single-A spreads have remained stickier, with very little widening,” the analysts said.

Growing investor scrutiny on potential pressure points in CLO portfolios is leading to elevated tiering in the secondary markets, according to the note.

“BBB tranches from CLOs with high-performing, clean pools trade at discount margins in the 425-440 [bps] area, while BBB tranches from CLOs with higher concentrations of pressured assets can trade wide of 575 bps,” the Wells Fargo analysts said.

BB tranches are trading in a wider range, “from 725 bps at the tights to well north of 1,000 bps,” the analysts said.

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