Mix-bag auction produces a handful of CLO trades

A 15-name auction of mostly upper mezzanine CLOs last week resulted in only four trades, perhaps reflecting weak demand amid a faltering stock market and ahead of today’s US public holiday. The bid list - see below - comprised a mixed bag of broadly syndicated CLOs, mid-market CLOs and a few other assets such as senior notes of the structured finance CDO Glacier Funding IV.

The bonds that traded were the class C tranche of Latitude CLO III, which had a cover price in the mid-to-high 40s, the DFR Middle Market CLO I class Bs with a cover in the low 40s, the class C of Duane Street CLO IV, which covered in the mid-30s, and the class D tranche of Nob Hill CLO II, which had a cover price in the low 20s.

Perhaps the most likely explanation for the lack of trades is that the seller, said to have been a hedge fund, did not like the bids on the other assets. As Wells Fargo researcher David Preston pointed out in a note to clients on Friday, secondary CLO prices have been flat from mid-August, having increased by some five to 10 points from the end of July.

CLO b-wid 2pm 1 September