European insurer and money manager AXA Group is in the market with its second U.S. collateralized loan obligation, according to rating agency reports.
The $400 million Allegro CLO II is a cash-flow transaction backed primarily by broadly syndicated senior corporate loans. Up to 7.5% of the portfolio may be invested in second-lien loans and unsecured loans.
JP Morgan Securities is the arranger.
The trust will issue six classes of notes; the senior, $244.4 million class A notes are rated triple-A by both Moody’s Investors Service and Standard & Poor’s. It was marketed with an interest rate of Libor plus 160 basis points, according to Moody’s; that’s at the high end of recent deals.
The deal has a five-year investment period, longer than the typical four-year period. The non-call period is also longer than usual; it ends in January 2017 or two business days prior to the anniversary of risk retention rules being published in the Federal Register. Risk retention rules would require sponsors of CLOs to retain 5% of the risk in these deals.
As of Dec. 18, 2014, the sponsor had identified 90% of the portfolio's collateral, according to S&P.
Although the CLO is managed in the U.S. and invests primarily in U.S. corporate debt, up to 20% of the collateral pay be in assets outside of the U.S., although only 10% can be outside the U.S., Canada and the U.K., according to Moody’s. Investments in Greece, Ireland, Italy, Portugal and Spain are prohibited. Among other investment guidelines, up to 5% of the portfolio may be put to work in bridge loans.
The manager of the CLO, AXA Investment Managers, is subsidiary of AXA IM Group, which manages 900 million in European CLOs through its affiliate, AXA Investment Managers Paris. As of July 2014, AXA IM Group had 379 billion in fixed income assets under management and over 20.7 billion in structured finance assets under management. The team that manages the structured finance assets has 67 professionals in offices in the U.S. and Europe.