While the high-yield bond market was roiled in more depressing default statistics last week, Salomon Smith Barney surprised several market participants with the tight execution of Highland Loan Funding V, a $503 million arbitrage cashflow CLO for Highland Partners.

Some of Highland's past deals have seen ratings volatility, market sources said. The triple-A tranche priced at 43 basis points over three-month Libor with an eight-year average life (A/L); all tranches priced at par. The single-A priced at 68 basis points over three-month Libor with a nine-and-a-half year A/L. Highland V is backed by 90% leveraged senior secured loans and 10% unsecured leveraged loans, said market sources.

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