U.S., Europe CLO primary cools; trading choppy; spreads widen; B spreads ease 100 bps

By Cristal Cody

Tupelo, Miss., Feb. 8 – CLO primary action continues to remain quiet to date in February, according to market sources.

“No CLOs priced for the second consecutive week, as the slowdown in issuance continues amidst persistent market volatility and relative value comparisons to the secondary market,” J.P. Morgan Securities LLC analysts said in a note.

Some deals in the works include CreekSource LLC’s $300 million Mill Creek CLO II, Ltd./Mill Creek CLO II LLC transaction via Goldman Sachs & Co. Prudential Investment Management, Inc. also plans to price the $507.75 million Dryden 42 Senior Loan Fund/Dryden 42 Senior Loan Fund LLC offering via BNP Paribas Securities Corp.

U.S. secondary market activity was moderate over the past week with BWIC volumes totaling about $560 million, according to BofA Merrill Lynch.

“Trading remained choppy as broad market volatility remained elevated,” BofA Merrill Lynch analysts said in a note.

CLO 3.0 AAA-rated notes are trading about 8 bps weaker on the year in the Libor plus 180 bps area, according to JPMorgan.

BB-rated spreads have widened 175 bps year to date to the Libor plus 1,000 bps area.

CLO B notes widened 100 bps over the past week and were 375 bps wider on the year at Libor plus 1,500 bps, JPMorgan said.

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