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Garrison lowers costs on 4 of 5 tranches in refi of 2016 CLO

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Garrison Investment Group has lowered its funding costs across four classes of notes in a refinancing of a 2016-vintage collateralized loan obligation.

The $410.5 million Garrison BSL CLO 2016-1 is issuing an AAA-rated tranche of Class A replacement notes that pays three-month Libor plus 149 basis points, according to Fitch Ratings. That's 20 basis points inside the 169-basis-point spread on the original deal (then called Garrison Funding 2016-1). But it's wide of a comparable Garrison Funding CLO rated by Fitch in 2018 that issued AAA notes paying only 97 basis points over Libor. This tranche was also upsized by $3 million to $257 million from $254 million originally.

Garrison also upsized and narrowed the spread on the AA-rated Class A-2a replacement notes that pays 200 basis points over Libor, 25 basis points inside the spread on the original tranche. (The original 225-basis point spread was reported by Thomson Reuters LPC, now Refinitiv in a 2016 report.) The $52.2 million tranche originally consisted entirely of floating- rate notes; there is now $12.2 million of notes that pay a fixed rate of 4.52%.

There is also a $16.1 million tranche of Class B-R notes that pays 275 basis points, 32 basis points inside the 307 basis point spread on the original notes; similarly, the $22.9 million tranche of Class C-R notes pays 400 basis points, versus 470 basis points originally.

For the $21.3 million Class D-R notes tranche, Garrison is paying more - 677 basis points, compared with the original 665 basis points.

Fitch is not rating the A-2 notes nor any of the junior note classes.

The equity residual in the deal is $38.1 million.

The refinancing will add a two-year reinvestment period and the deal will be non-callable for one year. The weighted average life of loans in the $401 million indicative portfolio of 248 loans is 4.8 years. (The transaction’s maximum weighted average life is six years.)

The deal is managed by affiliate Garrison Funding 2016-1 Manager LLC.

Garrison Investment Group, founded by chief investment officer Joseph Tansey (a former managing director at Fortress Investment Group), had approximately $3.3 billion in assets under management as of May 2018. The investment firm was established in 2007, with its main investments involving funds that invest in corporate lending and distressed assets, according to Garrison.

Garrison Investment Group issues both middle-market and broadly syndicated loan CLOs, some of them through its Garrison Loan Management arm and its Garrison Capital business development company.

The firm has six outstanding CLOs under the Garrison Funding platform, including two new-issue deals in 2018, according to Moody’s Investors Service.

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