Investors are eyeing several sizeable CLO equity BWICs taking place over the next several days. Data from the KopenTech BWIC platform shows that over $100 million in CLO equity on Monday, October 25th, over $60 million on Tuesday, October 26th, and another $20mm on Wednesday, October 27th. An additional listing may add to the fury of equity trading in the upcoming days.
October is set to be the second-highest equity trading month this year. The second half of the month’s equity trading increased significantly with $352 million trading over BWIC last week. On average, investors have listed $434 million of CLO equity on BWICs monthly.
On Thursday, October 21, there was over $130 million of CLO equity posted with traded coming in at $86 million, resulting in a DNT rate of 27%. You can view upcoming and historical BWICs as well as trading session summaries on KopenTech’s platform. KopenTech’s BWIC Dashboard displays a table summarizing the day’s trading activities and data is updated daily at 5:00 PM EST.
While none of the upcoming BWICs are control equity positions, at least two are positions of $10 million or more. Historically, the average size of a listed CLO equity on BWICs is $5 million.
What is causing such a large number of CLO equity trades? One possible reason is attractive IRRs. Internal rates of return can be calculated based on CLO equity where public color (the second-highest bid received during a BWIC RFQ) is available. Month to date, among the 27 trades that posted public color, the average IRR is 12.4%.
The range of IRRs was wide: from roughly 6% to almost 20%. While generally, CLO equity IRRs have a high correlation with a minimum junior OC cushion, this month the data looks like a cloud with barely noticeable correlation.
KopenTech is the premier source of secondary and primary issuance data for the CLO marketplace. Get this information and more at bwic.kopentech.com.