Two more collateralized loan obligations hit the new issue pipeline this week, despite uncertainty about the impact of the Volcker Rule on this market.

KKR Financial Advisors is marketing KKR Financial CLO 2013-2, a cash-flow transaction backed by a $369 million portfolio of broadly syndicated loan s, according to a presale report published by Moody’s Investors Service.

The deal will issue three classes of notes with preliminary ‘AAA’ ratings: a $100 million tranche is being marketed at three-Libor plus 150 basis points; a $10 million tranche is offered at a fixed rate of 3.3599%, and a $115 million tranche pays Libor plus 110 basis points for the first 18 months, Libor plus 175 basis points for the subsequent 12 months, and Libor plus 200 basis points thereafter.

KKR Financial CLO 2013-2 can invest up to 5% of its portfolio in fixed-rate assets and up to 10% in a category of assets that includes secured bonds, unsecured bonds and floating-rate notes.  

Holding any kind of security would make the CLO off-limits to banks under the Volcker Rule, as it is currently understood. Banks have been lobbying federal regulators for a work around that would allow them to continue holding CLOs backed by bonds, and several recently priced deals contain provisions that would preclude them from holding bonds in the absence of any regulatory relief. However, the presale report for KKR Financial CLO 2013-2 makes no mention of the Volcker Rule.

The report does not an unusual feature of the deal: a 45-day “cure period” for intentional violations of any provisions of the CLO by the manager. “Although consistent with the manager’s prior CLO, the existence of a cure period for intentional violations is very unusual in CLOs,” Moody’s states in the report. “However, given the manager’s established track-record of managing CLOs, we do not expect this feature to have a negative impact on the rated notes.”

GreensLedge Capital Markets and KKR Capital Markets are the deal’sunderwriters.

Oaktree Capital Management is also marketing its first deal of the year, the aptly named $462 million Oaktree CLO 2014-1.

Citigroup Global Markets is the initial purchaser and placement agent.

The senior, $310 million tranche with a preliminary ‘AAA’ rating from Standard & Poor’s is being offered at Libor plus 150 basis points.

Like KKR Financial CLO 2013-2, Oaktree CLO 2014-1 can allocate a portion of its portfolio to bonds; S&P’s presale report makes no mention of the Volcker Rule.

Oaktree has three other S&P-rated CLOs under management.

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