European Loan Repricings to Squeeze Margins on €5B of CLO Holdings

European CLOs by Pemberton, Brigade, Arcano and PGIM are among the most exposed to this week’s wave of loan repricings, according to Octus’ analysis of trustee report data.

Debt set to be repriced makes up more than 4% of the holdings in the Octus holdings database for some of the managers’ deals. This number slightly overestimates the CLO’s actual exposure since the sum of the holdings does not include cash. Click HERE to download the holdings dataset for all European CLOs tracked by Octus.

Borrowers are in the market to bring down the cost of €8.93 billion of term loan Bs, affecting €4.98 billion of CLO holdings. The issuers are taking advantage of a tightening market where investors appear to have grown less sensitive to the geopolitical uncertainty. The iTraxx Crossover, which serves as a benchmark for the European sub-investment-grade debt market, opened at 268 today, down from a peak at 362 at the end of March.

Stada, Colosseum Dental and IFCO Systems are aiming to tighten their margins to 300 to 325 bps over Euribor. Unica is targeting the tightest spread at 275 to 300 bps, Natra the widest at 375 bps. In each case, guidance is 25 to 50 bps inside the current margin. All companies fall within the single-B range of ratings.

In absolute terms, CVC Credit Partners, Apollo Global Management and KKR Financial Advisors have the highest exposure to repricing debt. Thirteen managers will see spreads compressed on more than €100 million of loans across their portfolios once the deals price, according to Octus’ data. Absolute holdings are correlated with the managers’ assets under management – whoever owns the most debt in total also tends to own a big chunk of debt by five large issuers.

All of the top 13 repricing debtholders are among the top 20 European managers by assets under management, or AUM, in Octus’ Structured Finance Ranking.