BlueMountain, Investcorp to issue combined €770M in European CLOs

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Investcorp Credit Management and BlueMountain Fuji Management are both launching their first European CLOs of the year.

They join Blackstone/GSO, PGIM, Credit Suisse, Guggenheim Securities and the Carlyle Group in reopening a new-issue market that was dormant in December.

Investcorp’s €409.6 million Harvest CLO XXI DAC is being priced with a €216 million Class A-1 note spread of 110 basis points for the triple-A rated notes, according to a presale report from Moody’s Investors Service.

The transaction is being placed by Barclays, and has six classes of term notes rated by Moody’s and Fitch Ratings.

The capital stack also a €1.5 million interest-only tranche, plus a 1.5% fixed-rate triple-A tranche sized at €30 million.

The deal is non-callable for two ears and has a 4.5-year reinvestment period. The deal’s projected weighted average life is 8.5 years.

The €261.4 million identified portfolio of senior secured loans, second-lien loans and high-yield bonds has a large exposure (75%) to lower Moody’s-rated B2 and B3 obligations, loans which have little cushion (none for the B3-rated debt) over the triple-C cushion, which is capped at 7.5% of the portfolio’s assets.

The London-based Investcorp has $6.3 billion in assets under management, and manages 13 CLOs in Europe.

The €360 million Blue Mountain Fuji EUR CLO IV is the fifth euro-denominated CLO for the firm, one of the investment advisory arms of New York-based Blue Mountain Capital that was established three years ago.

The deal includes a triple-A Class A-1 note spread of 108 basis points over Euribor, as well as a €15.75 million Class A-2 triple-A tranche priced at 126 basis points over Euribor. (The expected maturities of the A-2 notes are not published in the presale reports, but similarly rated bonds typically carry longer durations with wider spreads.)

BlueMountain’s transaction will have a 4.5-year reinvestment period and an 8.5-year weighted average life.

The deal must have a minimum 70% senior secured loan and bond collaterall; many euro deals have floors above 90% for those assets.

Over 64% of the identified portfolio consists of assets with low single-B (Moody’s B2 and B3) ratings.

Fitch said the deal will likely have up to a 10% of its collateral provided with assets from Italy. That is notable given Italy’s double-A “country ceiling risk” assessment that caps the maximum ratings a debt issuer or securitization from a non triple-A nation in the Eurozone can hold.

(The country risk ceiling, which is not a rating, reflects the potential that a European nation would depart from the eurozone monetary union and redenominate bonds and securities into local currency.)

The BlueMountain Fuji EUR CLO IV deal is the first European CLO for the firm since it issued the €358.95 million BlueMountain Fuji Euro CLO III last July at 90 basis points above Euribor.

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