The $609.6 million GoldenTree Loan Management US CLO 1 is the first broadly syndicated loan offering from a new collateralized loan management asset firm that was launched in January after entering into a services agreement with GoldenTree Asset Management.
GLM US CLO 1 was among four deals to launch last week with presale reports, and entered a pipeline of new deals that were off to another hot start in March after a brisk period of issuance in February.
The capital structure for the GLM deal has two triple-A rated tranches: a $367.5 million Class A tranche and a $5.6 million interest-only series of ‘X’ notes. The assumed coupon spread is 124 basis points over three-month Libor for the Class A notes, and 100 basis points over Libor for the IO bonds. The provisional structured finance ratings are from Moody’s Investors Service and Standard & Poor’s.
Only S&P issued ratings for the subordinate notes, including a $60 million Class B-1 tranche (with a coupon of Libor plus 155 basis points) and a $12 million B-2 class (fixed rate of 3.75%), each with a provisional ‘AA’ structured finance rating. Four deferrable note classes totaling $124.5 million have ratings ranging from ‘A’ to ‘B-’. The structure also has a $40 million subordinated notes tranche.
Unlike other recent new-issue CLOs that are stretching out their reinvestment periods, GoldenTree is maintaining the standard four-year window. LCM XXIV, for example – a $600 million senior-loan transaction pieced together by LCM Asset Management – is structuring a five-year non reinvestment period through July 2022.
When GoldenTree announced the launch of its new CLO affiliate in January, the asset manager revealed the unit was hitting the floor running with $600 million in committed funds after being oversubscribed from a diverse investor base of insurance companies, corporate and public pension funds, sovereign wealth funds, and family offices.
GoldenTree promised to have one of the “first and largest” CLO platforms to both invest in and manage CLOs that are compliant with both U.S. and European risk-retention rules, and a new structure that would “enhance returns” for the equity held by GLM.
In the structure reported in presale reports, S&P and Moody’s noted the variance in both higher total leverage and higher subordination of the ‘AAA’ notes than comparable CLOs rated within the past three months. The deal also includes a lower weighted average cost of debt, a higher weighted average spread and available excess spread, “which shows a stronger underlying portfolio from a cash flow perspective.”
While the deal includes a higher scenario default rate, is also has a higher weighted average recovery rate, according to S&P.
The GoldenTree CLO was among several deals priced or launched in a busy first week of new-issue CLO deals, following a busy February that saw a market deluge of new issuance alongside a large number of refinancing deals taking place.
The priced deals from last week included the $612 million Carlyle US CLO 2017-1 from Carlyle CLO Management; OHA Credit Partners X CLO, totaling $644 million, by Oak Hill Advisors; Octagon Investment Partners XIX with a notes offering of $454 million; and American Money Management’s $408 million AMMC CLO 20 by PGIM.
The deals are among $3.4 billion in new issue CLOs that have priced in March (alongside $5.6 billion in refinancing volume), research from JPMorgan shows. In February, new-issue volume reached $8.1 billion, according to Thomson Reuters LPC.
In addition to GoldenTree and LCM, new presales on deals closing later this month were also issued for the $368 million TIAA CLO II by Teachers Advisors (a subsidiary of TIAA Global Asset Management) and the $400 million ACIC CLO 2017-1 from Acis Capital Management.
Acis has slated only a two-year reinvestment period for ACIC 2017-1, ending in February 2019.