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Invesco replants flag in European CLO market

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Invesco Senior Secured Management is issuing its first European CLO since the financial crisis, according to Moody’s Investors Service.

Invesco Euro CLO 1 DAC (Designated Activity Co.) is among the deals closing out the 2018 European CLO market in pricing a €409.8 million portfolio of non-investment grade broadly syndicated loans, according to Moody's. The portfolio represents the first European collateralized loan obligation deal by the Atlanta-based global asset manager since 2006.

The deal, placed through Barclays, will be managed by the Invesco European RR L.P. subsidiary of Invesco. It also put the wraps on a record year of post-crisis European CLO issuance at €27.3 billion, besting 2017's €20.5 billion volume, according to a new CLO monthly report issued by Wells Fargo (citing data from Wells, Intex, S&P Global Ratings and Moody's Investors Service).

The transaction has a five-year reinvestment period and is non-callable for two years. Two senior tranche of notes will be issued: €214.4 million of Class A-1 notes priced at 102 basis points above the three-month/six-month Euribor rate, and €30 million in Class A-2 notes that pay a fixed coupon of 1.44%.

Invesco had €318.5 million of the portfolio of loans assigned to the portfolio at the time of the cutoff date, with a weighted average spread of 3.81% and a WA coupon of the underlying loans at 6.75%. The initial weighted average life of the collateral is 5.99 years, although the deal's covenant allow for a weighted average life of up to 8.5 years.

The deal has a maximum allowance of 10% of the pool for second-lien loans, senior unsecured obligations and high-yield bonds; up to 30% of the loans can have covenant-lite structures with limited maintenance oversight.

In the identified portfolio, the balance of loans is weighted toward the lower-rated single B variety, with 65.2% of the collateral pool consisting of loans rated B2 or B3 (three and four notches down, respectively, from the highest Moody’s double-B equivalent rating of Ba2).

Nearly 16% of the identified portfolio are loans within the health care and pharmaceuticals industries.

As of Sept. 30, Invesco had €5.7 billion in European loans under management (U.S. loan assets were $41.4 billion). Invesco manages 10 U.S. CLOs totaling $5.2 billion, ranking 40th among U.S. managers, according to Creditflux.

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