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Apollo refinances & slightly upsizes $475M CLO originally issued in 2016

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Apollo Credit Management is refinancing, and slightly upsizing, a $473.5 million CLO originally issued in 2016. But not every tranche of notes originally issued by ALM XIX has been upsized by the same amount. The proportion of senior notes is increasing, according to a presale report from Fitch Ratings.

The Class A-1 notes, which are rated AAA by Fitch, have been upsized by $18 million and are now split into two tranches. There is also a new, $1 million tranche of Class X notes, which is not rated by Fitch. And the size of the Class B tranche will be increased by $23.8 million to $48.5 million.

All other notes were reduced in size. The sharpest cut was to the Class A-2 notes, which sit between the Class A-1 notes and the Class B notes in payment priority; it is now $21.5 million, down from $49.4 million originally. However, the refinancing will result in more subordination for the Class A-2 notes (27.4%), thanks to the upsized Class B tranche.

The new transaction, sized at $475.75 million, is slightly upsized from the original $473.5 million portfolio by Apollo, which is an affiliate of Apollo Global Management (NYSE: APO).

ALM XIX will include a new two-year reinvestment period after the expected March 7 closing date for the manager to buy and sell assets that improve or maintain the deal’s credit quality. The refinancing will apply a new one-year non-call period to the transaction, as well.

ALM XIX is the most recent deal Apollo has issued through the Apollo Loan Management platform. Since 2016, Apollo has sponsored deals through affiliate Redding Ridge Asset Management, which was established as a capitalized vehicle to retain residual notes to meet U.S. and European risk-retention regulations.

Each of the tranches have reduced coupons in the refinancing, lowering Apollo's funding costs. The newly split Class A-1 tranche totaling $323.5 million include a $298.5 million Class A-1a-R tranche that pays 135 basis points over Libor, and a $25 million Class A-1b-R tranche with a spread of 155 basis points over three-month Libor.

A Moody’s Investors Service new-issue report from 2016 shows an original spread of 155 basis points for the original Class A-1 notes offering.

The reduced Class A-2 replacement notes pay 155 basis points over Libor, down form the original coupon of 220 basis points over Libor. That tranche, originally rated a double-A equivalent of Aa2 by Moody’s, is not being rated by Fitch.

The newly upsized Class B notes (with a Moody’s A2 rating) pay 260 basis points, down from 300 basis points. The replacement Class C notes also have a reduced spread of 360 basis points from 435 basis points, on $23.5 million in notes sized down from the $30.4 million tranche in the original deal. The new $21 million in Class D notes priced at 685 basis points over Libor replace the $23.75 million that priced at a 735 basis point spread.

The size of the residual tranche of securities is unchanged at $36.35 million.

Apollo Credit Management is an affiliate of Apollo Global Management, which oversees $280.3 billion in assets under management. Apollo manages $14.4 billion in U.S. and European CLO assets through ACM and Redding Ridge.

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