BlackRock Financial Management has re-priced a $366 million collateralized loan obligation, according to Standard & Poor’s.
The two senior tranches of BMI CLO I were redeemed and replaced with new classes of notes with paying lower interest rates, according to research published by S&P Monday.
The new $249 million class A-1R pays interest of three-month Libor plus 94 basis points, a reduction from Libor plus 125 basis points on the retired class A-1 notes. And the new $27 million class A-2R notes pay Libor plus 145 basis points, down from Libor plus 190 basis points on the retired class A-2 notes.
The deal, which was completed in May 2011, has three more tranches that were not re-priced.
S&P has assigned an ‘AAA’ rating to the class A-1R notes and an ‘AA’ rating to the class A-2R notes, consistent with the ratings of the retired tranches.
Many CLOs issued since the financial crisis have indentures allowing notes to be re-priced once the non-call period has ended. The transaction is initiated by holders of the most subordinated notes, known as the equity, via a supplemental indenture. Re-pricings are expected to become more common because spreads on new –issue CLOs have contracted sharply over the past year, providing more economic financing.
CLOs are also under pressure to re-price notes because many of the loans they hold as collateral are being re-priced in line with lower spreads available in that market.