Octus on Credit: CLO market limps towards normality

CLO managers are tentatively exploring new issuance again after last week’s tariff-induced volatility slowed dealflow in the US and brought it to a halt in Europe. A number of live CLOs were pulled from the pipeline, according to sources Octus spoke to. 

The US primary market is stuttering along with a new Ares deal here, a Carlyle reset there, and triple-As between SOFR+130-155 bps. In Europe, Pemberton is among the brave few managers said to be attempting to price a fresh deal before the end of the month. Pemberton initially launched the CLO, Indigo III, in late March. 

With the announcement of the 90-day pause on most tariffs a week ago, secondary CLO liability spreads are stabilizing at wider levels, much to the chagrin of tranche investors out for a bargain. But primary paper is still difficult to place and bankers are hesitant to predict where spreads may ultimately land. For the time being, Japanese support appears to be crucial to keep issuance going on both sides of the Atlantic. 

To learn more about the current CLO landscape, join us at our upcoming webinar on April 23rd or come meet us live at the DealCatalyst Annual CLO Industry Conference on April 28-29.

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