HPS Braves Volatility to Launch First Euro CLO Following Tariff Disruption

HPS Investment Partners is marketing a European CLO via Jefferies and aims to price the deal before the end of April, according to sources.

The triple-A tranche of the deal, which is named Aqueduct Euro CLO 11, has been preplaced with investors.

HPS and Jefferies did not respond to a request for comment.

While secondary CLO spreads are stabilizing at wider levels following the tariff-induced volatility of the last two weeks, market participants expect primary issuance to recover slowly, after several deals in the pipeline were pulled or paused. Sources say that investors are still skeptical about fresh deals.

“HPS will be the first big test for the market,” a tranche investor told Octus. “We like the manager, but we will decide at short notice.”

Arrangers remain cautious about predicting where primary spreads might land.

Tier one managers could price triple-As at 140 bps on both sides of the Atlantic, but the picture for lower-tier issuers is still unclear, a CLO manager said. Spreads could range from 135 bps to 160 bps.

Alongside HPS, Pemberton is testing demand for the senior tranche of its deal Indigo III at Euribor+140 bps, sources said. With its relatively short track record of only two European deals priced, Pemberton is generally not considered a tier one manager.

In the United States, Ares priced the triple-As of a new issue deal at SOFR+140 bps on Monday. Three U.S. resets were priced by Carlyle, Northwestern Mutual and Benefit Street Partners at levels from 137-155 bps this week.