CVC Credit Partners Readies €400M European CLO

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CVC Credit Partners is marketing what is only the second new European collateralized loan obligation of the year.

The €400 million CVC Cordatus Loan Fund VIII DAC will be backed primarily by a portfolio of euro-denominated senior secured loans and bonds issued by European borrowers, according to Standard & Poor’s. The exact proportion will be linked to the proportion of loans that are covenant-lite; the more cov-lite loans, the higher the proportion of collateral that must be senior secured.

A maximum of 12.5% of the loans in the collateral pool can be fixed-rate.

The transaction has a four-year reinvestment period, but can be called, or redeemed, by the subordinate noteholders after two years.

Goldman Sachs International is the arranger.

S&P expects to assign an AAA to two tranches of senior notes: €206 million of Class A-1 notes that pay a spread of 96 basis points over three-month Euribor and: €30 million of Class A-2 notes that pay a fixed-rate of 1.25%. Both tranches benefit from the subordination of the remaining 41% of the notes to be issues.

Compared to other CLOs that S&P has rated in the past three months, CVC Cordatus VIII has slightly lower total leverage and slightly higher subordination for AAA tranches.

It also has lower weighted average cost of debt, a marginally lower weighted average spread (WAS) and weighted average coupon (WAC), and a lower available excess spread.

Another notable feature, according to S&P, is that the CLO will enter into a liquidity facility agreement with The Bank of New York Mellon. It will be able to draw on the facility to pay any shortfalls that may occur under the priorities of payment, including distributions to equity.

The liquidity facility will be made available to the issuer four years from the closing date or the date upon which all rated notes are fully redeemed, whichever comes first.

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