Primary slows; pipeline forecast as steady through July; JPMorgan launches U.S. CLO index

By Cristal Cody

Tupelo, Miss., July 15 – CLO primary activity slowed, though issuance is expected to stay strong through the rest of the month, according to a market source on Wednesday.

About $10 billion of deals are in the pipeline, including a $615 million transaction from Prudential Investment Management, Inc. via Credit Suisse Securities (USA) LLC, sources said.

“In the U.S., the new issue market has priced $10-11 billion per month so far this year, and the pipeline remains solid, but we believe the pace should moderate in the second half of 2014,” Barclays analysts said in a note.

More than $78 billion of CLOs have priced globally this year, according to data compiled by Prospect News.

JPMorgan Chase & Co. announced on Tuesday that it has launched the first U.S. CLO index of its kind, the J.P. Morgan CLO Index, or Cloie, which will be updated daily.

“CLO issuance surged to $97 billion in 2013 and JPMorgan forecasts up to $120 billion in issuance for 2014,” Rishad Ahluwalia, JPMorgan’s head of global collateralized loan obligations research, said in a statement. “The record-breaking issuance, improved structures post-crisis and relative value will foster broader fixed income-benchmarked investor participation in CLOs.”

JPMorgan’s CLO index will “provide increased transparency and visibility to the growing CLO sector,” Gloria Kim, JPMorgan’s head of global index research, said in the statement.

The index will track the price and total return of floating-rate CLO securities from 2004 to the present.

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