Sound Point Capital refinances; CLO refinancing space active; middle-market supply eyed

By Cristal Cody

Tupelo, Miss., Sept. 28 – CLO refinancing action is expected to remain active over the near term.

Sound Point Capital Management LP refinanced $21.1 million of fixed-rate notes from a vintage 2018 CLO.

The manager has partially refinanced two CLOs in September.

More than $28 billion of vintage CLOs have been refinanced, while about $55 billion of new CLOs have priced year to date, according to market sources.

“We count a total of 30 fixed-rate tranche refis to date and estimate another 22 deals with fixed-rate tranches where managers/equity holders can realize at least 10 [basis points] of cost reduction if they refi those particular bonds,” BofA Securities, Inc. analysts said in a research note released on Monday.

“As swap rates have rallied by 136 bps since the beginning of the year, we continue to see fixed-rate tranche refis on the rise,” the analysts note.

Fixed-rate tranche yields are lower by 104 bps compared to the end of 2019 despite higher spreads, according to the report.

“As a result, managers/equity holders are opting to refi outstanding fixed-rate IG bonds,” the BofA analysts said.

Meanwhile, the CLO middle market may see additional new issuance over the last part of the year, according to reports.

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