August CLO deal rush propels market to monthly issuance record

During what is normally the industry's snooze period, bustling CLO managers last week priced 15 deals to propel the U.S. market to a record monthly total of $16.68 billion in deals through Aug. 20.

The August figure has already eclipsed the previous full-month mark of $16.24 billion set in March 2015 — and has topped the more recent totals from February 2021 ($15.89 billion) and June 2021 ($15.73 billion), which were the next highest-ever monthly dollar-volume market levels achieved in the post-financial-crisis era.

August has traditionally been a slow period for CLO issuance. U.S. market activity in August averaged approximately $6.7 billion before 2021 and exceeded $6.4 billion only four times. The previous high mark for August was $13.6 billion in 2018, according to LCD data.

Last week's tally of $9.49 billion in deals included new issues from Oak Hill Advisors, Ares CLO Management, KKR Credit Advisors and The Blackstone Group (Blackstone/GSO Debt Funds Management).

With $109.09 billion across 221 CLO transactions from 103 managers through Aug. 20, the market remains well positioned to break the largest full-year volume level of $128.86 billion in 2018. Last month, S&P Global Ratings revised its projected new-deal issuance level to $140 billion from its prior forecast of $120 billion.

Refinancing and reset volume through Aug. 20 was relatively quiet. The market priced 19 deals totaling $9.18 billion ($3.81 billion in refinancings, $5.37 billion in resets), representing the lowest monthly tally of refinancings/resets since December.

In a research note issued Friday, BofA Securities projected new-issue and refinancing/reset volume to "remain elevated" in September, as managers rush to price deals to Libor-based rates ahead of an expected market shift in the fourth quarter to a new secured overnight financing rate term benchmark.

The Federal Reserve-convened Alternative Rates Reference Committee has formally recommended Sofr.

* Article amended at 12:51 p.m. on Aug. 24, 2021, to clarify that 15 deals priced last week.