3i Debt Management Investments is prepping a €309.6 million ($411.5 million) European collateralized loan obligation, in a further indication that a
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.
