European CLO manager CVC Credit Partners is preparing its first broadly syndicated loan portfolio of 2016 that will issue €400 million (US$447.3 million) in euro-denominated bonds.
CVC has already acquired 56% of the target portfolio of €411 million in loans for CVC Cordatus Loan Fund VI, and has identified another 24% of the portfolio’s target par amount. Moody’s Investors Service stated the UK-based manager will obtain the assets by the undetermined closing date. Most of the loans will be Europe-based, with about 10% obtained from U.S. issuers.
Moody’s and Fitch ratings have each assigned their provisional triple-A structured finance ratings to the Class A notes totaling €248 million, which will be priced at 150 bps over the three-month Euribor rate. The AAA stack will have credit enhancement of 38% in the portfolio, supported by €108.5 million in surbordinate bond tranches as well as an unrated €54.5 million residual equity slice.
The Class B notes, rated ‘Aa2’/‘AA’ and totaling $43 million, will have 27.3% of effective subordination and a price of 215 bps over Euribor. The $21 million in C notes will be priced at Euribor plus 350 bps; the $17.1 million in D notes at 500 bps over Euribor; and $25 million in E notes will be priced at Euribor plus 500 bps.
The underlying identified loans in the portfolio are from 173 obligors, which have an average rating of ‘B2’ on the Moody’s scale. The weighted-average rating factor (WARF) of 2750 is on par with recent CVC CLOs and other 2016 CLO issues from peer managers. (WARF is a numeration of the portfolio loans’ accumulated ratings, scaled from 1 to 10000 with higher numbers representing a riskier pool mix).
Moody’s calculates the initial overcollateralization coverage level as 137.5%. CVC Cordatus VI will feature the standard four-year reinvestment and two-year non call periods, and will be comprised of 90% first-lien loans. It is restricted to up to 10% of fixed-rate assets, 7.5% of Caa-rated or below assets; and no more than 60% cov-lite assets.
CVC Credit Partners manages multiple investment funds and vehicles with approximately $14.4 billion of assets under management with assets in the U.S. and Europe, according to Moody’s.