Another European CLO has come to market.
Intermediate Capital Managers said today it priced a €400 million cash flow collateralized loan obligation.
Lloyds Bank was the sole arranger on the transaction, which was rated by Fitch Ratings.
The deal, St Pauls CLO II Ltd., has a senior, €240 million tranche rated ‘AAA’ by Fitch; it also has a €40 million 'AA'-rated class; a 2€6 million, ‘A’-rated class; a €17 million, 'BBB'-rated class; a €15 million, 'BB+'-rated class and €62 million of unrated subordinated notes.
“This is the third new CLO ICG has brought to market since the financial crisis," Dagmar Kent Kershaw, head of credit fund management, said in a press release. "Whilst the re-emergence of the European CLO market remains slow, we intend to fully participate and maintain our leadership in the market.”
The portfolio will comprise a minimum of 90% senior secured loans and floating rate notes. Recovery prospects for these assets are typically more favorable than for second-lien, unsecured, and mezzanine assets. The reinvestment period is scheduled to end in 2017.
Basis and reset risk is naturally hedged for most of the portfolio through the floating rate, semi-annually paying liabilities. Fixed rate assets can account for no more than 10% of the portfolio and no more than 5% of the assets can pay interest less frequently than semi-annually, according to Fitch.
Although the CLO can put up to 35% of its portfolio to work in assets denominated in a currency other than the euro, it also has the ability to offset resulting foreign exchange risk via asset swaps.