Canyon CLO Advisors is planning to issue its largest CLO 2.0 to date with a portfolio targeting up to $450 million in leveraged loans.

The Los Angeles-based manager, a unit of Canyon Capital Advisors, is issuing its first CLO in nearly a year through Canyon CLO 2016-1. The transaction is a follow-up to the $400 million Canyon Capital CLO 2015-1 issuance in April 2015, according to a presale report from Fitch Ratings.

The notes will be issued in a capital structure that includes two Class A note tranches, differentiated by varying levels of credit enhancement within the triple-A stack. Canyon Advisors will offer notes adding up $247.5 million (or 54.7% of the portfolio’s pool) in the Class A-1 slice that features “above average” CE of 45%, compared to recent-vintage CLOs in the market. The Class A-2 notes, totaling $45 million will have a below-average 35% CE.

The price on the Class A-1 notes is Libor plus 160 bps; the Class A-2 are prices at Libor plus 225 bps.

The portfolio also have $42.25 million in ‘AA’-rated Class B-1 notes (priced at 243 bps over Libor) and Class B-2 notes with a fixed-rate 3.95% coupon totaling $5 million.

All ratings are preliminary.

A residual equity slice totaling $39.25 million, or 8.7% of the portfolio, will be reserved to meet the risk-retention requirements forthcoming for U.S. CLOs beginning in December.

Goldman Sachs was the arranger.

The indicative portfolio of targeted loans indicate a mix of 97.2% first-lien loans and 2.8% second-lien, with 91.1% of the loans featuring recovery ratings of ‘RR2’ or better from Fitch. The average credit rating quality of the underlying assets is ‘B+/B’, in line with other recently issued CLOs in the fourth quarter of 2015 and the first quarter of this year.

The loans carry a weighted average ratings factor (WARF) from Moody’s Investors Service that is lower than that of Canyon 2015-1, providing a measure of slightly higher corporate debt ratings among the obligors this time around. The target Moody’s WARF in the new portfolio is 2509, compared to 2614 from last year and 2726 of recently issued CLOs.

WARF numbers are determined by assigning a numerical representative to a Moody’s corporate rating (ranging from ‘1’ for an ‘Aaa’ rating to 10000 for a ‘Ca-C’ rating) and averaging the resulting figures from the entire pool of obligors.      

Canyon is utilizing a higher concentration of industry groupings this time, with 51.7% of the loans coming from among the top 5 sector concentrations – compared to only 31.5% in last year’s CLO. Canyon 2016-1 has 15.7% of the loans derived from the computer and electronics industry, compared to Canyon CLO 2015-1’s heaviest concentration of only 8.9% to high-tech industry firms.

The overcollateralization trigger on the Class A and Class B notes is 122.5%.

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