Citigroup is arranging a $350 million CLO for the U.S. investment arm of Dutch insurer Aegon.
The deal, dubbed Cedar Funding, includes a $227.5 million tranche with a provisional triple-A rating from Fitch Ratings. Pricing has yet to be established, according to a presale report Fitch published today.
Cedar Funding will be Aegon’s first CLO, and the deal has some features designed to make up for the investment manager’s limited experience with leveraged portfolios in this kind of a structure. The manger is not allowed to reinvest at the end of the deal’s three and a half-year reinvestment period, which ends in November 2015. Furthermore, the portfolio will be actively managed and will be bound by concentration limitations and collateral quality tests, during the reinvestment period, Fitch said.
Credit enhancement of 35% for the class A-1 notes is 35%, which the ratings agency said is in line with average levels for recent deals.
The non-call period of 2.5 years is the longest Fitch has observed to date.
On the closing date, the issuer is expected to enter into a participation and assignment agreement with bankruptcy remote affiliates of Citibank, whereby approximately $321 million of assets that are currently owned by the affiliates will be transferred to Cedar Funding via participation interests.
This commitment represents approximately 91.7% of the target par amount of $350.0 million; the remaining proceeds from the new issuance will be used to purchase additional collateral in open market transactions.
Fitch considers the indicative portfolio to be similarly diversified in terms of the number of unique obligors compared with the majority of CLOs issued in 2012.