Fair Oaks sells €263.9 million CLO; negative watch placements slow; high-grade notes gain

By Cristal Cody

Tupelo, Miss., May 20 – New issue volume is continuing to resume in the CLO markets, including euro-denominated supply.

Fair Oaks Capital Ltd. priced a €263.9 million broadly syndicated CLO.

Fair Oaks Loan Funding II DAC sold €142.8 million of class A floating-rate notes at Euribor plus 190 basis points at the top of the capital stack.

More than €7 billion of euro-denominated CLOs have priced year to date with volume slowed since the Covid-19 pandemic was declared in March, according to market sources.

CLO negative watch rating announcements have thinned over the past week, according to a Wells Fargo Securities LLC report on Wednesday.

Since March, Fitch has downgraded seven euro CLO tranches from five deals, according to the Wells Fargo Securities report.

“No other major rating agency has downgraded a euro CLO,” Wells Fargo analysts said in the note. “No new U.S. or euro CLO tranches have been placed on watch negative by the major rating agencies in the past week.”

In secondary market activity, average prices for high-grade CBO/CDO/CLO issues climbed to 95.50 on Tuesday from 94 at the start of the week and 93.70 on Friday, according to Trace data.

Lower-rated paper softened to 67.50 in the prior session from 70.50 on Monday.

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