Light first-quarter CLO supply in view; ACIS tranches downgraded; high-grade trade pauses

By Cristal Cody

Tupelo, Miss., Jan. 2 – The CLO market stayed quiet in the first session of 2020 after seeing steady new issuance into late December.

New deal volume is expected to be light in the first quarter of 2020, though a number of issuers have warehouses open for new CLO transactions expected to print in 2020, according to market sources.

Dollar-denominated CLO volume totaled more than $114 billion in 2019, while euro-denominated supply grossed about €30 billion, according to market sources.

CLO refinancings closed out 2019 with volume of more than $43 billion.

“New CLO issuance volume will decline in 2020 from the 2019 level, reflecting decreasing arbitrage, investors' concern about the late-cycle performance of corporate credits, and a reluctance to invest in floating-rate products should interest rates continue to fall,” Moody’s Investors Service said in a Dec. 31 market report.

In other activity, Acis Capital Management, LP gave notice that tranches in three of its vintage CLOs were downgraded by S&P Global Ratings in 2019, according to notices on Tuesday.

The rating on ACIS CLO 2014-3 Ltd.’s class E notes was dropped to BB-, while the class F tranche was lowered to B- on July 31.

In the ACIS CLO 2014-4 Ltd. transaction, S&P downgraded the class E notes to BB- and the class F tranche to B on Oct. 28.

Of the ACIS CLO 2015-6 Ltd. vehicle, the rating on the class E notes was dropped to BB- on Oct. 28.

Non-high-grade paper trades

Looking at the secondary market, little action was seen over the holiday-shortened session on Tuesday, according to Trace data. The markets closed early at 2 p.m. ET for the New Year’s Day holiday.

No reported amount of investment-grade CBO/CDO/CLO paper was traded but $10.3 million of non-high-grade issues traded at an average price of 90.60 and a weighted average price of 90.50 during the session.

© 2015 Prospect News.
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