Octagon, CreekSource, Telos price CLOs; volume thin; spreads flat to tighter; BBBs firm

By Cristal Cody

Eureka Springs, Ark., April 4 – March primary action picked up with new issuance from CLO managers including Octagon Credit Investors, LLC, CreekSource LLC and Telos Asset Management LLC though volume is expected to stay light over the spring, according to market sources on Monday.

Octagon Credit Investors brought a $509.1 million CLO deal.

CreekSource priced $302.5 million of notes.

Telos Asset Management tapped the market with a $252.47 million transaction.

Last week, Canyon CLO Advisors LLC priced the $451.1 million Canyon Capital CLO 2016-1, Ltd./Canyon Capital CLO 2016-1, LLC deal, while 3i Debt Management Investments Ltd. brought the €413 million Harvest CLO XV Designated Activity Co. offering.

“On a quarterly basis, U.S. CLO volume in the first quarter of 2016 came in at $8.2 [billion], which is the slowest pace of CLO formation since the first quarter of 2012 which saw $6.4 [billion],” J.P. Morgan Securities LLC analysts said in a note.

“While most sectors have rallied to levels at the start of the year, CLOs have yet to fully retrace,” the analysts said.

In the secondary market, CLO 2.0/3.0 spread levels tightened from February month end and traded flat to better over the past week, BofA Merrill Lynch analysts said in a note.

BBBs traded 25 bps better over the past week, coming in 50 bps tighter on the month at Libor plus 600 bps, the analysts said.

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