Merrill Lynch brought to market last week the $366 million Emporia Preferred Funding II - a collateralized loan obligation managed by Cohen Brothers subsidiary Emporia Capital Management and backed primarily by middle-market loans.
The market priced the deal relatively wide, with the triple-A tranche pricing at 29 basis points over Libor and the triple-B tranche at 195, according to JPMorgan Securities. The middle-market loan sector has been increasingly sought after by some CLO managers because of its relatively high yield (ASR, 04/17/06).
The deal has a 12-month ramp-up period and six-year reinvestment period. Eighty-five percent of the collateral is first-lien, broadly syndicated loans, while 15% are second lien, according to Fitch Ratings. U.S. Bank will act as trustee. Middle-market loan CLO issuance should reach between $16 billion and $18 billion by year-end, according to JPMorgan. To compare, last year's issuance totaled a record $10.6 billion.
Cohen Brothers subsidiary Emporia Capital Management - initially called Cohen Brothers CLO Manager - was formed in March 2005, and closed its first issue, Emporia Preferred Funding I, the following October. Cohen has been gearing for more issuance and portfolio management, adding two portfolio managers to the Emporia team since its first issue, along with an additional staff member allocated to CDO administration and operation. The team reports to Kevin Braddish, managing director and chief financial officer.
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