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
