Invesco refinances CLO; strong refinancing pace hinders supply; spreads forecast to firm

By Cristal Cody

Tupelo, Miss., March 2 – Invesco Senior Secured Management, Inc. refinanced $407 million of notes in a vintage 2013 CLO.

More than $22 billion of U.S. dollar CLOs have been refinanced year to date, while about €2.62 billion of euro-denominated CLOs have been refinanced since the year started, according to market sources.

New deal volume totals more than $6 billion in the U.S. market over the past two months. About €830 million of new issue European CLOs have priced year to date.

The wave of repricings is not helping make the arbitrage work on new deals, according to a report on Thursday from Mark Matthews, global head of the finance group for Maples and Calder law firm, and Nicola Bashforth, an offshore Maples and Calder lawyer who specializes in structured finance transactions.

“Refinancing and repricings account for the greatest primary market activity so far in 2017 with nearly $8 billion in CLO repricings in January alone as managers and arrangers take advantage of tightening spreads and the Crescent Capital's SEC no-action letter,” the report said. “At the same time, the new issue market remains sluggish as managers continue to struggle to source new collateral at attractive prices.”

In the meantime, CLO spreads are expected to continue to tighten with AAAs possibly in the low Libor plus 120 basis points area by the end of the year, according to the Maples and Calder report.

CLO investors expect spreads to continue to tighten, according to a Wells Fargo Securities LLC analyst note recapping an annual securitization conference that ended Thursday.

“The general tone of the conference centered around strong technicals and tight spreads, leading to a near unanimous view that spreads should continue to grind tighter,” the analysts said. “In the CLO market, the main topics of conversation were a lower bound of AAA spreads, the possibility of the return of the six-year reinvestment period and the market for CLO refis.”

Invesco refinances CLO

Invesco Senior Secured Management refinanced $407 million of notes due Jan. 15, 2026 in the vintage 2013 Blue CLO, Ltd./Blue Hill, LLC transaction, according to a market source and a notice of executed first supplemental indenture dated Wednesday.

The CLO priced $307.5 million of class A-R senior secured floating-rate notes (Aaa/AAA) at Libor plus 118 bps in the senior tranche.

Morgan Stanley & Co. LLC was the refinancing agent.

Invesco will continue to manage the CLO, which is collateralized primarily by broadly syndicated first-lien senior secured corporate loans.

Proceeds from the refinancing were used to redeem the original notes on Tuesday.

Invesco Senior Secured Management is a subsidiary of Atlanta-based Invesco, Ltd.

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