LFI: CLO Pipeline: Putnam debuts new platform at L+120 on AAAs (5 bps back of bellwether Octagon); YTD new issues total $139B, repricings $191B

Despite CLO spread widening last week, a second BSL CLO platform debuted in October:?Putnam priced triple-As at L+120 with a (5Y reinvestment/2Y non-call).

The Putnam $407 million debut was led by Morgan Stanley.?J.P. Morgan underwrote the $354 million?Beach Point Capital Management CLO that sold AAAs at L+122 earlier this month. The last time a CLO manager priced inside of 120 bps was in 2018, according to LFI.?

Another signal of vigorous BSL CLO new-issue demand was that GSO Blackstone circled AAAs for its upcoming Whetstone Park CLO at L+112 via BNP Paribas, sources Said.?

Looking to print medium-term are 167 transactions (80 new issues and 87 refi/resets), according to?LevFin Insights and Fitch Ratings.

The spread on new-issue AAA tranches widened a tick to a median of 116?(+1 bps week-over-week) breaking the three-week streak of tightening, according to?LevFin Insights.?

New-issue loan transactions stayed mostly flat on the week, moving a tick tighter to 459.??

CLO new-issue volume rose to $139 billion (+$3 billion WoW) across 289 deals for the year to Friday, Oct.15.?

CLO repricing volume (refi $89.6 billion/ reset $101.8 billion) rose to $191.4 billion for the year to Oct. 15.

Libor transition and refi/reset volume?

Though too early to gauge until initial price discovery, it’s possible Libor transition increases U.S. CLO refi/reset activity (which competes with new issue) as equity considers economics of switching to SOFR ahead of hardwired adjustments, according to Rishad Ahluwalia, CLO strategist at J.P. Morgan. For context, an additional $98 billion of U.S. CLOs (13% of outstanding) become callable in 2022, most of them in the first half (71%), and adding to the $358 billion (47%) already callable and still reinvesting beyond 2021, meaning that a majority of CLOs will lack call protection.