The leveraged loan market may have hit the pause button, but at least three U.S. managers were marketing collateralized loan obligations this week, according to rating agency presale reports.
Invesco was up with the $512.5 Limerock CLO III via Credit Suisse. The cash-flow deal has a standard four-year reinvestment period and two-year non-call period, according to Fitch Ratings. The $315.0 million senior tranche of notes was marketed at Libor plus 153 basis points; it is rated AAA’ by Fitch.
Napier Park Global Capital was also out with the $500 million Regatta V Funding. This deal has two senior classes with preliminary Aaa’ ratings from Moody’s Investors Service. One is sized at $227 million and was marketed at Libor plus 156 basis points; the other was sized at $95.5 million and has step-up coupon: it pays Libor plus 147 basis points until October 2016, 1.76% until October 2017, and 2.00% thereafter.
Citigroup Capital Markets is the initial purchaser.
MCF Capital Management also marketed the $405.9 million MFC CLO IV, which is backed by loans to small and medium-sized companies. The $228.5 million senior tranche, rated AAA’ by Fitch, was marketed at three month Libor plus 170 basis points. Middle market CLOs typically offer higher spreads than CLOs backed by more broadly syndicated loans to compensate for their lack of liquidity, among other factors.
MFC CLO IV has another feature not typical of CLOs of more broadly syndicated loans. Its eligibility criteria exclude not only corporate bonds, which puts deal off limits to bank investors; also excluded are second-lien loans. Since the Volcker Rule made holding bonds unattractive, most CLO managers have used second-lien loans as a substitute.
Wells Fargo Securities is on the left of the deal.
There was some activity in Europe as well; Babson Capital was planning the 412.5 Babson Euro CLO 2014-2. The deal has two senior tranches with preliminary Aaa’ rating from Moody’s: a 269.5 million tranche marketed at a spread of Euribor plus 123 basis points and a 46.0 tranche marketed at a fixed rate of 1.81%.
While many recently issued European CLOs have excluded high yield bonds in order to market themselves in the U.S., Babson Euro CLO 2014-2 is obviously not one of them: the manager can put up to 10% to work in high yield notes.