Garrison Capital, a lender to middle market companies, has securitized some additional loans on its balance sheet. Proceeds will refinance an existing credit facility, in the process both increasing the company’s leverage and reducing its costs of funds.

The collateralized loan obligation, called Garrison Funding 2013-2, issued a total of $350 million of notes, according to a company press release. There was a single, $50 million “revolver” class priced at 190 basis points over the cost of funds that was rated ‘AAA’ by Standard & Poor’s.

There were also three term tranches: a $111.2 million, ‘AAA’-rated tranche priced at 190 basis points over three-month Libor;  a $24.2 million, ‘AA’-rated tranche priced at Libor plus 340 basis points and a $24 million, ‘A’-rated tranche  priced at Libor plus 465 basis points.

The deal’s $139.6 million of subordinated notes will be retained by Garrison. The business development company will also retain $22.0 million of term ‘AAA’-rated notes.

The CLO’s reinvestment period ends in September 2016; the notes are scheduled to mature in September 2023.

Proceeds of the private placement will be used to refinance Garrison’s existing credit facility.  The transaction increase the company’s leverage from $175.0 million to $188.4 million and its leverage ratio will increase to from 0.69x to 0.75x.

It will also reduce its cost of funds from approximately 3.3% to 2.4%.

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