Guardian Life marks 2019 CLO debut in $398M deal

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Guardian Life Insurance Co., which was one of the first insurance companies to launch into CLO management in 2016, is sponsoring its first deal of 2019 through the carrier’s Park Avenue Institutional Advisers affiliate.

The $398.7 million Park Avenue Institutional Advisers CLO 2019-1 is a broadly syndicated collateralized loan obligation of senior secured loans, with a price of 148 basis points over Libor for the $247 million AAA-rated senior notes, according to a presale report issued Friday by S&P Global Ratings.

The capital stack also includes a split fixed- and floating-rate tranches on the Class A2 notes carrying a AA rating, and three subordinate Class B, C and D classes totaling $62 million. (The lower three classes of notes have optional deferred interest features).

The deal is the manager's fourth, and brings Park Avenue’s CLO assets under management to $1.65 billion, S&P reported.

Park Avenue CLO 2019-1, placed via JPMorgan, has a standard two-year noncall and five-year reinvestment period for the manager to trade in and out of loan assets. More than 86% of the identified portfolio of 120 loans have been ramped up into the transaction, according to S&P.

Covenant-lite loans will be capped at 60% of the collateral pool.

Guardian’s first CLO – Park Avenue Institutional Advisors 2016-1 – was a $406 million transaction that was part of a wave of transactions from well-capitalized life and casualty firms choosing to manage their own deals, instead of investing in CLOs run by other managers. (That deal was refinanced last August, extending its noncall period through August 2020 and its reinvestment through August 2023).

Insurers have traditionally been investors in CLOs, but three years ago Guardian, financial services giant TIAA-CREF and a Newfleet Asset Management – the fixed income unit of a former asset management unit of a property & casualty firm Phoenix Life – sprang up with debut CLO deals of their own. The deals were in part driven by new risk-retention standards for CLOs that year which reduced the field of managers capable of holding enough capital on the books absent a capitalized partner.

With the risk-retention rules slated to take effect in late 2016, carriers moved into to fill the void in the CLO deal pipeline that shrank dramatically that year in anticipation of the new rules.

In its debut year of issuance in 2017, CBAM CLO Management – formed in a partnership with private equity firm Eldridge Industries – issued more than $5 billion in deals that included management of senior-loan investments of another Eldridge-controlled entity, Security Benefit Life. CBAM was the leading CLO issuer by dollar volume that year.

(The risk-retention requirements for securitizations under Dodd-Frank were overturned for CLOs in a federal panel ruling last year, the result of a lawsuit filed by the Loan Syndications & Trading Association).

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