Golub readies $442M CLO of broadly syndicated loans

Golub Capital is printing its first collateralized loan obligation of 2019, although not through its signature middle-market CLO platform.

Golub Capital Partners CLO 40 is a $442.2 million, open-market collateralized loan obligation being managed by affiliate Opal BSL LLC, an affiliate tasked with securitizing the firm’s investments in large corporate senior loans.

The deal has a five-year reinvestment period and cannot be called for two years..

Two senior tranches of notes will be issued: $270.5 million of Class A-1 notes that pay 140 basis points over three-month Libor and $8.9 million of Class A-2 notes that pay Libor plus 175 basis points; both are rated AAA by Fitch Ratings.

Fitch's presale report does indicate what might account for the wider spread on the Class A-2 notes, but when to tranches of notes carry the same credit ratings, investors typically demand additional compensation for the one with the longest duration.

Last year, the $25 billion-asset Golub Capital issued six CLOs, four of them middle-market deals financing its direct lending and late-stage lending activity for small and medium-sized corporates.

The credit asset manager operates an affiliated publicly traded business development company (Nasdaq: GBDC) that it is seeking to merge with its privately held Golub Capital Investment Corp. to give the company better access to funding through the securitization market. (The deal requires approval from the shareholders in both BDCs).

This is the first CLO of broadly syndicated loans managed by Opal and issued by Golub since last September when it sponsored the $409.6 million Golub Capital Partners CLO 39(B). Prior to that, it issued the $435 million Golub Capital Partners 37 (B) in August.

Golub’s last middle-market deal was the $908.2 million GCIC CLO II deal issued in November.

The collateral for the latest transaction includes 173 identified loans from 165 corporate obligors, representing 95.2% of the final pool composition. The portfolio of identified loans has a weighted average life of 5.5 years, well within the covenanted nine-year maximum life of the expected final portfolio.

The industry concentrations in the pool are led by healthcare (15.5%) and business services (11.6%).

Golub ranked 11^th among U.S. CLO managers in outstanding deal volume of $12.94 billion across 22 deals, as of September 30 of last year, according to CreditFlux.