CLO Deals Tied to SOFR Set to Begin in Fourth Quarter, BofA Says

Issuance of collateralized loan obligations tied to the Secured Overnight Financing Rate rather than Libor is likely to start in the fourth quarter, according to Bank of America Corp.

• That would likely mean SOFR issuance for term loans as well given CLOs constitute about 65% of the outstanding leveraged loan market, strategists led by Pratik Gupta wrote in an Aug. 19 report, citing conversations with investors
• “The question however remains on spread adjustment for 1-month, 3-month Libor: Current Alternative Reference Rates Committee (ARRC) recommended adjustments of 11bps and 26bps respectively are higher versus the spot basis (5bps between 1-month Libor ...