Heller Financial is close to launching West Loop, its first arbitrage CLO, and one of the first visible CLO that uses a significant portion of middle-market asset-based loans, 20% in this case.
CIBC World Markets is underwriting the deal.
Heller is understood to be contributing up to 20% of the portfolio collateral from its balance sheet in the form of middle-market cashflow loans. The other collateral is secondary market syndicated loans, sources said.
In an asset-based loan, asset coverage is considered especially strong, with the right collateral. Institutions are lending against the borrower's specific assets rather than making a credit judgement on a company based on projected cashflows.
Other top asset-based lenders include GE Capital, Bank of America and Fleet Business Credit, who also have the infrastructure in place to monitor these types of loans and conduct ongoing surveillance (See ASR 1/15/01).
Note that Heller has been in the cashflow lending business since the mid-80s and in the asset-lending business since the early 90s. The combination of cashflow-based and asset-based loans adds an additional element of diversification to the loan portfolio, CDO sources said.