In the wake of its founders announcing their retirement, KKR Financial Advisors II, a subsidiary of private-equity giant Kohlberg Kravis Roberts (KKR), is in the market to refinance a $457.8 million, broadly syndicated CLO that was previously refinanced last fall.
The $457.5 million KKR CLO 30 Ltd. transaction is split into four rated and three unrated floating-rate tranches, according to S&P Global Ratings in a Nov. 3 pre-sale report. Pricing ranges from three-month Libor plus 102 basis points on the $274.5 million piece rated AAA, to Libor plus 640 basis points on the $43.5 million unrated, subordinated portion, according to Finsight.
S&P says the notes will be issued through an amended and restated indenture and provide a lower spread on all of the tranches except the subordinated portion. The rating agency notes that it has assigned credit ratings to 99.5% of the underlying loans and recovery ratings to 96.7%.
Compared to other broadly syndicated CLOs, S&P says, the KKR CLO 30 deal has lower total leverage and higher subordination, with leverage resting at 9.52%, and subordination at 40% for the AAA portion and 13.44% for the BBB piece.
In addition, S&P says, the transaction has a lower weighted average cost of debt, at 1.285, a similar weighted average spread of 3.45%, and lower available excess spread of 2.17%.
Loans to software companies make up the largest portion of the portfolio, at nearly 10%, followed by those to health care providers and services; information technology services; hotels, restaurants and leisure; and diversified telecommunication services.
In terms of rating distribution, approximately 64% of the pool comprises loans rated ‘B’ and ‘B-‘ by S&P, with ‘B+’ the next most common, at approximately 12%.
Founders and cousins George Roberts and Henry Kravis announced in October stepping down as co-chief executives from KKR, which manages $430 billion in assets. They will remain actively involved as executive co-chairs of KKR’s board of directors.
