A CLO managed by BlackRock Financial Management, BMI CLO I, is expected to price this week, according to sources.
Citigroup Global Markets, the arranger, provided price guidance late last month of Libor plus 125 basis points for the triple-A tranche; Libor plus 175 basis points for the double-A tranche; Libor plus 265 basis points for the single-A tranche; Libor plus 365 basis points for the triple-B tranche; and Libor plus 525 basis points for the double-B tranche.
According to a Moody's Investor Service presale report, the transaction is a typical cash-flow CLO backed by a $400 million U.S. dollar-denominated, broadly syndicated loan portfolio. The portfolio comprises principally senior secured, first-lien loans with a maximum average rating of 'B2'.
BMI CLO I is expected to have a one-year non-call period and a three-year reinvestment period. Like many recent transactions, it will have a legal maturity of 10 years.
Moody's has assigned preliminary triple-A ratings to the offering's Class A-1. The agency based its ratings on estimates of expected loss and the deal's structural and legal features.
The portfolio makes up a minimum of 90% senior secured loans and a maximum of 10% second-lien loans, senior secured bonds, senior unsecured bonds, and unsecured loans, according to the Moody’s report.
The loan assets in the initial portfolio, along with reinvestment assets, are assumed to have a weighted average floating spread of 365 basis points, along with a discount price of 99. The bonds in the portfolio are assumed to have an average fixed-rate coupon of 7.25%.
The collateral risk is mostly limited to corporate senior secured loan risk. Additionally, Moody's said that Blackrock as a manager is prohibited from investing in certain securities including structured finance, synthetic, lease, zero coupon, convertibles, securities that are allowed to defer interest, and obligations with attached warrants.
The senior management fee is 0.15% per year, while the subordinate management fee is 0.35% per year. BlackRock is expected to earn an incentive management fee of 20% of excess cash after the CLO equity has received a 15% internal rate of return.
The trustee on the CLO is Citigroup and the collateral administrator is Virtus Group.
