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Invesco keeping skin in the game of refinanced $400M CLO

U.S. regulations no longer require Invesco Senior Secured Management to maintain an eligible risk-retention stake in its roster of CLOs. Neverthless, it it holding on to more than 5% of the economic risk of the $400 million Annisa CLO even as it refinances the deal.

Invesco, through its manager Invesco RR Fund L.P., is marketing six classes of notes that will replace five tranches originally issued in August 2016. But Invesco will hold on to the $40.4 million subordinated tranche of the riskiest securities issued in the deal, which put it in compliance with not just U.S. but also European Union risk-retention regulations, according to a presale report from Moody’s Investors Service.

"The class of subordinated notes issued on the original closing date is not subject to this reset and will remain outstanding," the report states.

ASR_0703Invesco

The deal originally closed four months prior to the December 2016 enforcement date of U.S. risk-retention regulations established under the Dodd-Frank Act. But it was issued with an eligible horizontal (or equity-only) affiliate interest that satisfied rules regimes on both continents, which for Europe required Invesco to stand as the originator for at least 5% of the assets.

The U.S. regulations were vacated in May after a February federal appeals court decision that resulted from a lawsuit filed by the Loan Syndications & Trading Association.

Annisa CLO was Invesco’s first CLO to be dual-compliant with both U.S. and EU risk-retention regulations.

While the retention stakes will be status quo, the changes to the terms of the deal will extend the deal’s reinvestment period another three years until July 2023 and reapply a two-year non-call window. The deal’s weighted average life is being extended to nine years from the existing 6.25 years, according to Moody’s.

The reset will narrow the spreads on each of the debt tranches – including the AAA tranche coupon shifting to 110 basis points over three-month Libor from the original 155-basis-point spread.

The deal is the second CLO reset transaction for Invesco this year. In April, the firm drew new terms and coupons for its $369.6 million Upland CLO, which priced at a 102-basis-point spread on its AAA notes. The firm does not have another CLO with an expiring non-call until the first quarter of 2019, according to Fitch Ratings.

Invesco currently manages 12 CLOs with $6.09 billion in assets under management.

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