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Carlyle affiliate CELF Advisors LLP is expected next month to reissue the Carlyle Global Market Strategies (GMS) Euro CLO 2014-1 with five tranches of Class B and Class C replacement notes, according to a presale report from Moody’s Investors Service.
The new tranches replace and upsize the Class B and Class C note tranches originally issued in March 2014. The new notes are part of an overall upsizing to €508 million for the 4-year-old deal originally issued with €368.3 million in notes backed by an actively managed portfolio of euro-denominated leveraged loans and high-yield bonds.
The Carlyle refinancing tracks the unusual structure introduced in the refinancing of the $524.8 million MidOcean Credit CLO III, which is replacing a $312 million triple-A tranche with six different tranches totaling $305 million (along with a newly introduced, AAA-rated Class X interest-only tranche of notes).
Note classes are often split into tranches with different rates and tenors tailored to the demands of individual investors looking for more targeted maturities and yields than otherwise available in standard five- or six-tranche CLO note offerings. However, it's unusual for a single class of notes to be split into more than two tranches.
Carlyle's two previous refinancings of Europe CLOs this year involved the addition of two smaller, lower-rated (Aa2) senior-note tranches to Carlyle GMS Euro CLO 2014-3 in January and Carlyle GMS Euro 2016-1 in April.
The 2014-1 deal was originally refinanced in the first quarter of 2017, but the repriced A, B and C notes were contained to original single-class tranches at that time.
The replacement notes in Carlyle’s 2014-1 euro deal include a Class B-1-R tranche (€16 million, priced at Euribor plus 143 basis points), Class B-2-R (€23 million, with a fixed coupon of 2.05%) and Class B-3-R (€6 million, Euribor plus 143 to 175 basis points). The new €45 million in Class B note tranches will replace the single-tranche €40 million Class B notes, but maintain a 29% subordination level because of corresponding upsizing across the capital stack.
The B notes maintain Moody’s Aa2 rating.
The €19.35 million in Class C notes issued from the 2014 deal will be replaced by C-1-R notes (€21 million, with a coupon of Euribor plus 190 basis points) and C-2-R notes (€12 million, with a rate to be determined between 190 and 222 basis points over Euribor).
The higher-volume C-notes tranche will boost the Class C subordination to 22.06% from the original 19.35%.
Carlyle will maintain the individual Class A notes tranche, which is being upsized to €300 million from €218.3 million.
