Carlyle, Credit Suisse Join Euro CLO Parade

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Two new issues have been launched in the suddenly revitalized collateralized loan obligation market in Europe.

Carlyle Global Market Strategies Euro CLO 2016-1 was launched with target par of €400 million (US$457.1 million) in notes backed mostly by senior secured loans and secured bonds. Those secured instruments must cover 90% of the pool assets, while the remainder can include unsecured loans, second-lien loans, mezzanine obligations and high-yield bonds.

Moody’s Investors Service and Fitch Ratings have issued preliminary ratings on the issue, which is the first in Europe for The Carlyle Group since last June. The AAA-stack consists of €246 million notes that will be issued through Carlyle Euro 2016-1. A Class A-2 tranche of €43 million of notes is provisionally rated with an ‘Aa2’ structured finance rating by Moody’s and ‘AA+’ by Fitch.

Another €69 million in notes is divided among Class B, C and D notes. CELF Advisors LLP, the London-based advisory firm and CLO manager for The Carlyle Group, has already issued €52 million in subordinated notes for the equity tranche that will not be rated.

The weighted average spread of the loans is 4.175%, according to Moody’s. The CLO includes a four-year reinvestment period and a two-year non-call.

On Monday, Moody’s also issued provisional ratings on a new Euro CLO issue from Credit Suisse, through its Credit Suisse Asset Management (CSAM) arm. Cadogan Square CLO VII B.V. has a target portfolio of €400 million, again consisting mainly of European corporate leveraged loans. Like Carlyle 2016-1, it can contain up to 10% of unsecured loans, second-liens, mezzanine debt and HY bonds.

The pool of notes to be issued is topped by a €241 million Class A tranche with the early ‘Aaa’ rating.  The CLO includes five tranches of notes, not including a €53.65 million subordinated equity stack.

The weighted average spread of the underlying loans is on par with Carlyle at 4.2%.

According to Moody’s CSAM is expected to have about 70% of the loans ramped up by the closing date, with obligors mostly domiciled in Western Europe. The remainder will be acquired in the subsequent six month ramp-up period.  

Cadogan Square CLO VII follows nearly a year after last June’s issuance of Cadogan Square CLO VI Euro-denominated securitization, which was also a €400 million portfolio of broadly syndicated loans managed by CSAM.

No pre-sale reports were issued for either CLO.

The new CLOs add to the stockpile of new portfolios that have rushed to the market since mid-March, after a new European Central Bank corporate bond-buying expansion program was announced – and stoking investor interest in higher-yielding assets. Only two European CLOs had priced in the first two-and-a-half months of 2016.

N.M. Rothschild and Sons’ Five Arrows Managers LLP priced its first European CLO since November 2014 with Contego CLO III B.V. Contego followed on the heels of new deals priced in March including Commerzbank, 3i Debt Management, CVC Credit Partners, and U.S.-based BlueMountain CLO.

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