Several newer managers are in the market with CLOs this week.
Covenant Credit Partners LLC is marketing its first collateralized loan obligation, according to a presale report published by Moody’s Investors Service.
The deal, Covenant Credit Partners CLO I, is backed by $500 million of broadly syndicated loans; however Moody’s is only rating the senior tranches. It has assigned a preliminarily Aaa’ to the $305 million class A notes, which were offered at 148 basis points over LIBOR. That’s at the high end of recently issued CLOs, indicating that investors are still demanding some yield compensation for lack of experience.
The deal’s investment management agreement states Carlyle Investment Management will assume management duties as a successor management if Covenant Credit Partners is removed or resigns, a fairly standard practice for firms with a short track record.
Morgan Stanley & Co. is the underwriter for the transaction.
The deal has a fairly standard two year non-call period and a four-year reinvestment period.
Covenant Credit Partners is based in Charlotte, NC and was founded in October 2013. According to the presale report, the firm’s investment team consists of eight investment professionals and two operations analysts. The manager partner of the firm had previously managed CLOS at a “well-known CLO manager,” and the head of credit investment and the head trader also joined from other CLO managers and have extensive experience in leveraged loans, according to Moody’s.
Covenant Credit Partner’s website lists Ron Baron, Marc Boatwright, and Gaurav Suri as its founders.
Another “newbie” CLO manager in the market this week is Triumph Capital Advisors, which was formed in February of last year and has a single CLO under its belt, or at least a single CLO rated by Standard & Poor’s. The firm’s latest deal, Trinitas CLO II, is backed by $381.6 million of broadly syndicated loans.
S&P has preliminarily assigned a preliminary AAA’ rating to three tranches of notes, including the $173.75 million class A-1 notes, marketed at a spread of three-month LIBOR plus 127 basis points, and the $75 million class A-2 notes, marketed at 160 basis points over LIBOR.
The deal’s reinvestment period ends July 15, 2018, and the notes cannot be called until July 2016.
Nomura Securities International is the arranger for the deal.
NYL Investors LLC was also formed in 2013, but aswholly owned subsidiary of New York Life Insurance Co., is not exactly a newcomer. The firmis the market withthe $400 million Flatiron CLO 2014 Ltd.
Moody’s has assigned a preliminary Aaa’ rating to the class $256 million class A-1 notes, which were marketed at 138 basis points over LIBOR. The notes cannot be called until July 2016 and have a reinvestment period of about four years.
Merrill, Lynch, Pierce, Fenner & Smith underwrote the deal.
NYLI and its affiliated investment advisors had more than $519 billion in assets under management across all portfolios and strategies. Though also a relatively young, Moody’s believes that “the manager has extensive experience in the leveraged loan market and in managing CLOs.”
Veteran Oak Hill Advisors plans to issue a $750 CLO, OHA Credit Partners X. Moody’s has assigned a preliminary Aaa’ rating to $463.5 million of class A notes marketed at Libor plus 147 basis points.
The deal has a 2.1-year non-call period and a 4.1-year reinvestment period. Oak Hill expects to have acquired about 50% of the collateral at closing.
Morgan Stanley is both the underwriter and initial purchaser for the deal.
Oak Hill Advisors L.P. currently manages 13 other collateralized loan obligations. Formed in 1991, it had approximately $21.7 billion in total assets under management across all portfolios and strategies as of March.