November 2021 | Issue 240

Nochu returns to CLO new issues after two-year break

Hugh Minch
Norinchukin Bank made its long-awaited return to the CLO primary market last month, investing in US CLO triple A notes once more. According to market sources, the bank was anchor investor in Blackstone Credit’s Whetstone Park CLO, which priced via BNP Paribas on 22 October.
Tokyo-based Norinchukin made its comeback after more than two years away from CLO investing on 24 September, when it rolled its investment in Octagon Investment Partners 41 as part of a reset. The bank is rumoured to have bought triple As in several other US CLOs and has been looking at European deals.
Nochu’s return has yet to move the market for triple A spreads, which were 1.24 basis points wider in October than in September for five-year reinvestment deals. Secondary spreads also widened by around 4bp from the start of the month as Creditflux goes to press, according to data from Prytania Solutions’ index.
Whetstone Park, however, scored the tightest triple A print in almost two months, with the senior tranche yielding 112bp over Libor and attaching at 38.5%. The Octagon deal that preceded it priced its triple A at 116bp, which was 4bp wide of the market tights in September.
Nochu stopped buying CLOs in the summer of 2019 after attracting regulatory scrutiny in Japan. Before the pause, the bank was the anchor investor in almost all the deals of some of the largest managers in the market.
This year the value of the bank’s CLO portfolio has tumbled by 33.4%, from JPY 7.4 trillion ($71.7 billion) on 31 December 2020 to JPY 5.3 trillion ($47.73 billion) on 30 June. The trajectory meant it is likely to be eclipsed as the largest CLO noteholder by JP Morgan and Wells Fargo some time this year. The US banks held $36.25 billion and $33.89 billion, respectively, on their 30 June quarterly statements.
A source at a manager that was historically on Nochu’s approved list says they expect the bank to resume investing heavily again, noting that the performance of the market during Nochu’s absence, as well as CLOs’ performance through the covid crisis, means the case for further regulation has eased.
A spokesperson for Blackstone declined to comment. A spokesperson for Norinchukin could not be reached for comment.
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Global credit funds & CLO's
November 2021 | Issue 240
Published in London & New York.
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