Goldman Sachs is issuing its first post-crisis managed CLO, according to S&P Global Ratings.
The $354.9 million Battery Park CLO Ltd. is a broadly syndicated loan portfolio that is the first “CLO 2.0” deal sponsored by Goldman Sachs Asset Management (GSAM).
At year’s end 2018, GSAM had about $6.5 billion in CLO notes it held under supervision for clients, but had not sponsored a “full discretion” managed deal since 2007, according to S&P’s presale report.
The structure of the deal is unusual, in that the primary $262 million tranche of the deal consists of an AA-rated tranche of loans instead of bonds. The A loans tranche is priced at 149 basis points over Libor, according to S&P.
The only AAA-rated offering in the deal is a $1.5 million Class X tranche that will collect only interest.
Goldman Sachs is also utilizing a combination-note structure, in which a $35 million subordinate tranche with an A- principal-only rating is being backed by the Class B-1 (rated A), Class C (BBB-) and Class D (BB-) notes in the deal.
Battery Park CLO has a standard two-year noncall and five-year reinvestment period for the manager to buy, sell and trade underlying assets to improve underlying credit metrics in the deal.
The portfolio consists of partial interests in 213 debt obligations, with an average holding of less than 0.5% per loan. The largest exposure is with loans in the software industry, making up more than 12% of assets identified for acquisition by the manager.
Up to 70% of the loans may be covenant-lite (loans with little or no ongoing maintenance requirements from lenders, and are usually assigned lower recovery ratings than covenanted corporate loans).
