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Brigade Capital refinances notes to boost tranche ratings

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CLO manager Brigade Capital Management has refinanced several tranches of notes to improve the spreads and boost the tranches' ratings.

The new deal's Class D mezzanine tranche was upgraded by Moody's Investors Service to Baa1 from Baa3. The securities were originally issued in October 2018.

"Moody's rating action on the Class D Notes is a result of the refinancing, which increases excess spread available as credit enhancement to the rated notes, Moody's said, adding that the notes also benefited from shortening the portfolio's weighted average life.

The Brigade Debt Funding II Ltd. Deal is a partial refinancing of $40.44 million in Class B senior secured notes rated Aa1, $15.96 million in Class C mezzanine secured deferrable fixed-rate notes rated A2, and the $17.56 in Class D mezzanine secured deferrable fixed-rate notes that Moody's upgraded. All the notes are due in 2035.

The original Brigade Debt Funding II Ltd, also provided a $149 million tranche rated AAA by Moody's that was not refinanced in the recent deal. GreensLedge was the structuring lead on the 2018 deal as well as the current deal.

In refinancing the securities, Brigade Capital found investors willing to accept lower coupons. The refinanced Class B and Class C pieces priced for a coupon of 3.29% and 4.04%, respectively, down from $5.25% and $6.25% in the in 2018 deal, according to Finsight.

The Class D portion found a coupon of 5.5% in 2018; pricing on the refinanced Class D portion was unavailable.

Brigade Capital made headlines in August when the administrative agent on a loan to Revlon Inc. accidentally wired more than $900 million to lenders. Bloomberg reported that Brigade Capital was supposed to receive $1.5 million in interest on loan principal of $174.7 million, but instead it received $176.2 million.

Citigroup has since sued the lenders to retrieve the funds. In mid-October, Bloomberg reported that the bank is dropping claims against Investcorp Credit Management, which it said had received $18.9 million, after being "pleased to have these funds returned," and a trial on the remaining claims is scheduled for Dec. 9.

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