Diameter CLO Advisors' first CLO of 2023 is a $507.1 million transaction secured by senior secured loans, cash and eligible investments in a range of industries, but primarily in the software, healthcare and media industries.
Some 243 obligors make up the collateral pool, which appears to be highly diversified. Diameter CLO 4 consists mainly of broadly syndicated, speculative-grade senior secured term loans. The software, commercial services and supplies and insurance industries are among the top industries referenced among obligors, the rating agency said.
The largest obligor accounts for about a 1.40% holding of the collateral pool, while the smallest accounts for 0.10%, according to a pre-sale report from S&P Global Ratings. BofA Securities is the notes' initial purchaser.
Diameter Capital CLO 4 is expected to close on January 19, and has a reinvestment period that ends on Jan. 15, 2026. The notes are benchmarked to the three-month Secured Overnight Financing Rate (SOFR), with rates ranging from 2.40% on the $149 million, class A-1 notes to 8.55% on the $17 million, class D notes.
As for credit enhancement to the notes, Diameter Capital benefits from subordination. The structure also provides excess spread, and overcollateralization.
S&P expects to assign ratings of 'AAA' to the A-1, A1L (loans tranche) and A-1N notes; 'AA' to the A-A2 and A-2B notes; and 'A' to the class B deferrable notes. The rating agency expects to assign ratings of 'BBB' to the $22.5 million, C-1 notes; 'BBB-' to the $5.5 million, C-2 notes; and 'BB-' to the $17 million, class D notes.
