Senior notes in the Spire deal, Aurium CLO I, are bookbuilding via Deutsche Bank at 135bp DM, some 5bp outside the 130bp spread which sole arranger Barclays managed for the Carlyle trade. This may reflect Spire’s weaker name recognition in the European market or an attempt to build momentum in syndication, with a view to pricing inside initial pricing thoughts.
The coupons and cashflow structure of the deal suggest the latter, with a fixed 130bp coupon for the senior notes. Further down the capital stack the same pattern emerges — the B-1 notes are marketed at 220bp DM but feature a 215bp coupon, the C-1 notes are marketed at 310bp DM with a 300bp coupon.
The fixed rate B-2 and C-2 tranches, as well as the equity, are listed in price guidance as “call desk”.
In the junior mezzanine, the relationship breaks down as pricing is likely to be more bespoke and negotiated. The class D notes have initial pricing thoughts of 425bp with a 365bp coupon, the class E notes have initial pricing thoughts of 635bp with a 560bp coupon, and the class F notes have initial pricing thoughts of 800bp with a 650bp coupon.
Although the Spire name is new to the European market, the investment manager’s team are well known from former lives as part of 3i. Spire is led by Jonathan Russell, the former head of buyouts, with Phil Bennett-Britton and Oliver Drummond Smith as portfolio managers.
The backdrop for European CLO issuance should remain strong. Deutsche Bank’s research noted “a flurry of redemptions” from legacy CLOs in January, with total CLO wind-downs year to date of €800m.
Bank of America Merrill Lynch’s research team noted lower trading volumes in European CLOs last week, though the team saw a high proportion of CLO equity on bid lists, from pre-crisis and post-crisis deals. For the mezzanine debt tranches they saw, “spreads were firm, with limited impact on the market caused by concerns over Greece’s debt negotiations".
More CLOs
Elsewhere in CLOs, Goldman has been working on the latest deal for Pramerica, Dryden 35, which was increased to its maximum size of €442m and looks set to price its senior notes at 130bp. The equity in the deal is not on offer, unlike in the Spire deal, but many structural features are similar.
Bosphorus CLO I, a static CLO for Commerzbank arranged by Sterne Agee, was rated this week. The deal is backed by a €230m pool of euro denominated leveraged loans and senior secured bonds, with 57 assets from 45 different obligors.
The deal is Commerzbank’s debut leveraged loan CLO, and is being managed by the bank’s Debt Fund Management division. It features six rated tranches and a subordinated class, according to Fitch. It was priced with a 115bp spread on the senior notes, thanks to the static portfolio and shorter WAL than the other deals in the market.