3i Debt Management Investments is prepping a €309.6 million ($411.5 million) European collateralized loan obligation, in a further indication that a policy fight hasn't shut the market down,
Resource Capital Markets and Natixis S.A are arranging the transaction, which is dubbed Harvest CLO VII. 3i currently manages 24 CLOs.
The deal features five classes of senior floating-rate notes and one of subordinated notes. The €177 million A notes with 41% credit enhancement are assigned preliminary 'AAA' ratings from Standard and Poor's. The €34 million B, €20 million C, €13.6 million D, €23 million E, and €42 million subordinate notes are rated 'AA+', 'A', 'BBB', 'BB', and not rated, respectively.
The A notes are being marketed with an interest rate of six-month Euribor plus 135 basis points; the B notess six-month Euribor plus 175 basis points; the C notes six-month Euribor plus 280 basis points; the D notes six-month Euribor plus 370 basis points; and the E notes six-month Euribor plus 550 basis points.
It is an actively-managed cash flow CLO backed by a portfolio of primarily senior secured loans made to speculative-grade European corporates. The pool has 98 obligators with an average holding of 1.02%. Food products make up the largest industry.
S&P notes in a presale report that 3i can purchase corporate rescue loans which pay interest and principal on a current basis and that these loans may be obligations of a debtor in possession (DIP) under U.S. bankruptcy law or made to an obligor undergoing a restructuring or insolvency process. However, the purchase of corporate rescue loans is limited to 5% of the portfolio.