Owl Rock wraps $395.31 million middle-market CLO; AAA, AAs rally; trading volume heavy

By Cristal Cody

Tupelo, Miss., March 27 – Several CLO managers closed on new broadly syndicated and middle-market deals, while prices are improving in the secondary market, according to market sources on Friday.

Owl Rock Capital Advisors LLC closed on a new $395.31 million middle-market CLO.

“Following this transaction, we have approximately $2 billion of cash and undrawn debt capacity and remain well positioned to continue executing our investment strategy of lending to upper-middle market, sponsor backed companies in recession resistant industries and supporting our borrowers and the sponsor community through the current turbulence in the market,” Craig W. Packer, chief executive officer of Owl Rock Capital Corp., said in a news release.

“Given the current market conditions, we were especially encouraged by the robust response this transaction received from investors,” Packer said.

Also on Friday, GLG Partners LP closed on its previously reported €352.78 million Man GLG Euro CLO VI DAC broadly syndicated deal, which placed €217 million of class A senior secured floating-rate notes at Euribor plus 90 basis points.

In addition, Bain Capital Credit LP closed Friday on its previously reported $507.9 million Bain Capital Credit CLO 2020-1 Ltd./Bain Capital Credit CLO 2020-1 LLC broadly syndicated offering. The CLO had priced the senior tranche at Libor plus 119 bps.

Meanwhile, CLOs have improved along with the loan market and other credit markets following the Federal Reserve’s coronavirus-related stimulus programs this week, Wells Fargo Securities, LLC analysts said in a note on Friday.

“AAA and AA prices have posted a significant rally on the week; single-A’s have also posted a large increase,” the analysts said. “BBB prices are up on the week as well, while BB’s continue to lag. We expect the rally in AAA’s to slow as prices get closer to par and spreads look less compelling.”

Senior AAA and AA CLO tranches were soft on Monday, while lower mezzanine bonds “bottomed out closer to mid-week,” the analysts said.

By Thursday, estimated average CLO AAA prices improved to 95 and were tighter at a discount margin of Libor plus 235 bps, compared to 85 and a Libor plus 460 bps discount margin on Monday, the Wells Fargo report said.

CLO tranches were better across the stack in the secondary market by the end of the week. Average estimated BBB prices improved to 75 and a discount margin of Libor plus 750 bps from 63 and a Libor plus 1,000 bps discount margin on Tuesday.

Secondary volume has been heavy over the past two weeks and measured by Trace data was more than two times the average monthly volume with nearly $17 billion of volume from March 13-26, according to the Wells Fargo report.

In the previous session, $1.19 billion of high-grade CBO/CDO/CLO securities traded, compared to $1.99 billion on Wednesday, $1.7 billion of volume on Tuesday and $3.19 billion on Monday, according to Trace data.

Also, $577.5 million of lower-rated issues were traded on Thursday, up from $241.18 million on Wednesday, $170.28 million on Tuesday and $50.73 million at the start of the week.

High-grade CBO/CDO/CLO paper traded at an average 87.50 on Thursday, down from 87.90 on Wednesday but improved from 76.80 on Tuesday and 80.70 on Monday, Trace data shows.

Non-high-grade CBO/CDO/CLO paper improved in the previous session to 56.50 from 54 on Wednesday, 54.20 on Tuesday and 50.80 on Monday.

Elsewhere, leveraged loan funds saw $2.09 billion of outflows for the week ended Wednesday, down from last week’s record outflows of $3.45 billion, Fitch Ratings said in a report on Friday.

Owl Rock prices

Owl Rock Capital Advisors sold $395.31 million of notes in the new middle-market offering, according to a market source and a news release on Friday.

Owl Rock CLO III, Ltd./Owl Rock CLO III, LLC sold $166 million of class A-1L loans, $40 million of 2.75% class A-1F fixed-rate notes, $20 million of class A-2 floating-rate notes, $34 million of class B floating-rate notes and $135.31 million of subordinated notes.

The floating-rate notes have a blended interest rate of approximately Libor plus 192 bps.

SG Americas Securities, LLC was the placement agent.

The notes are due April 20, 2032.

The CLO is backed mainly by middle-market senior secured term loans.

Owl Rock Capital Advisors is a New York-based alternative asset manager.

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