Blackstone/GSO Marketing €403M European CLO

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Blackstone/GSO Debt Funds is marketing a €403.55 million collateralized loan obligation, according to a presale report published today by Standard & Poor’s.

The deal, Grand Harbour I, is only the third to hit the market since the financial crisis, although several others are in the works. It consists of six tranches of rated notes totaling €355 million and €48.35 million of unrated subordinated notes.

Citigroup Global Markets is the underwriter.

The €240 million, ‘AAA’-rated class is being marketed at six-month euribor plus 130 basis points, according to the presale report. That’s the same level at which Pramerica sold the top-rated tranche of its €300 million Dryden XXVII Euro CLO 2013.  

The lack of European loan issuance has been a hurdle for CLO managers putting together new deals. Grand Harbor addresses this issue by allowing the portfolio manager to purchase noneuro-denominated obligations subject to entering into an asset swap at the same time.

The manager can also put as much as 10% of the portfolio to work in below investment grade bonds, which are fixed-rate. It can also fill the portfolio with covenant-lite loans.

Blackstone/GSO has identified 100% of the indicative portfolio, according to S&P. However, the portfolio is only expected to be 88.0% ramped-up at closing, following which the collateral manager has a six-month period to fully ramp-up to the target  par of €400.0 million.

Another hurdle for new CLOs is a European Union directive that requires the original lender, originator and sponsor of the CLO to retain an economic interest of at least 5% in the deal. S&P said that Mediterranean Bank, the CLO’s sub-adviser, will hold this stake.

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