Goldentree Tweaks Its First European CLO
GoldenTree Asset Management appears to have added a €59 million subordinated class to a European collateralized loan obligation (CLO) it is marketing.
On Tuesday, Standard & Poor’s updated its presale report on the deal, GoldenTree Credit Opportunities European CLO 2013-1, to include the class of subordinated notes, which are unrated.
The deal now consists of a total of €285.000 million and £15.32 million of floating-rate, fixed-rate, and subordinated notes.
Three tranches of senior notes totaling €117 million and £15.32 million have preliminary, ‘AAA’ ratings from S&P. They now benefit from 55% credit enhancement.
The €82 million class A-1 is being marketed at six-month Euribor plus 135 basis points; the €35 million class A-2 is being offered at a fixed rate of 2.44% and the £15.32 million class A-3 at 2.64%, according to the updated presale report.
Morgan Stanley is the lead arranger.
S&P said that, as of June 6, the issuer had identified a portfolio of €300 million of mostly U.S. and European loans and bonds, representing all of the total assets to be acquired. However, only 80% of the portfolio is expected to be ramped-up at closing. The collateral manager then has a six-month period to fully ramp-up.
The rating agency cites as a risk factor the portfolio manager’s ability to purchase non-euro- and non-sterling-denominated obligations if it simultaneously enters into an asset swap. The portfolio manager could fill the collateral pool with loans that do not contain financial covenants for the lending party's benefit, or do not require continued compliance with one or more financial covenants.
S&P also noted that Goldentree is expected to retain the three classes of subordinated notes at closing, which is expected to be July 11. This would put the deal in compliance with regulations requiring sponsors to retain a 5% economic interest in securitizations. However S&P said the transaction “is not intended to comply” with risk-retention requirements.