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BlackRock UK nears $3B in CLO assets with third 2018 deal

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BlackRock Investment Management UK is marketing its third European collateralized loan obligation of the year, pushing its euro-denominated CLO assets under management toward €3 billion.

The €411 million BlackRock European CLO VII DAC brings BlackRock into the small club of UK managers that have issued three or more 2018 portfolios of senior loans and high-yield bonds.

BlackRock VII includes a 4.6-year reinvestment period and an 8.5-year weighted average life, according to presale reports published by Fitch Ratings and Moody’s Investors Service.

The triple-A tranche coupon is 96 basis points above the negative three-month Euribor rate (-0.319 on Oct. 30), falling in line with other October deals with spreads pricing near 100 basis point mark. European CLO spreads have widened eight of nine months since January, when CLO AAA margins were averaging 71 basis points.

The deal’s price widened from the 87 basis point spread of the predecessor €412 million BlackRock European CLO VI DAC in July. The noncall and reinvestment periods are similar, although the allowance for non-euro assets was narrowed to 20% from 30% in the BlackRock VI transaction.

BlackRock European CLO VII also does not include a small tranche of senior fixed-rate AAA notes like the previous deal, although BlackRock added a new €20 million tranche of C-2 notes within the mezzanine stack, with a 3% rate.

Another slight change Fitch found “negligible” was in the interest payment waterfall, in which deferred interest will be paid after the required payments to meet coverage tests.

With its third deal, BlackRock UK has totaled €1.237 billion in 2018 issuance, on top of the €1.7 billion in CLO assets under management the firm has amassed since launching its European CLO business three years ago.

Only GSO/Blackstone (€1.65 billion) and PGIM (€1.33 billion) have issued higher volumes of European CLOs this year. PGIM’s total includes the only eurozone CLO this year to be denominated in British pounds sterling (the £335.86 million Dryden 63 GBP CLO 2018).

When the deal closes, it will add to a year-to-date total of 93 European CLOs that have priced this year totaling €38.2 billion (new issue as well as refinancings), slightly ahead of last year’s pace of 99 deals totaling €36.5 billion, according to JPMorgan.

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CLOs CDOs BlackRock Europe