Ares Management is readying a $1.26 billion collateralized loan obligation, according to presale reports published by Fitch Ratings and Standard & Poor’s.

Net proceeds from the deal, Ares XXXI CLO, will be used to purchase a portfolio of primarily senior-secured leveraged loans.  At least 96.1% of the portfolio will be made up of first-lien senior-secured loans.  As of July 24, 62.98% of the collateral pool has been identified.

The $759 million class A-1 notes received preliminary triple-A ratings from Fitch and S&P.  The notes benefit from a credit enhancement of 39.2% and will be marketed at three-month Libor plus 144 basis points.  Fitch assigned provisional ‘AA’ ratings to the $136 million class A-2 notes being offered at a spread of 195 basis points over three-month Libor.  They will benefit from a 28.3% credit enhancement.

Ares XXXI CLO will have a four-year reinvestment period and two-year non-call period—both in line with recent CLO issuances.

JP Morgan Securities is the arranger and placement agent.

Ares CLO Management’s last transaction, $347 million Ares XXX CLO, was issued in June.  The $85 million class A-1 loans and the $240 million class A-2 notes, together the “class A debt” were rated ‘Aaa’ by Moody’s Investors Service.

Ares CLO Management XXXI is a wholly-owned subsidiary of Ares Management.  Ares Management is an SEC-registered investment adviser and alternative asset management company, established in 1997.  As of July 2014, the group manages approximately $77 billion in assets and has managed 24 CLO deals.

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