LCM Asset Management, American Capital and Telos Asset Management added three collateralized loan obligations totaling nearly $1 billion to the new issue pipeline Friday, according to rating agency reports.
The $344.7 million LCM XXI is LCM's 21st CLO. The senior $235 million ‘AAA’-rated tranche of class A tranche pays Libor plus 155 basis points, and is rated 'AAA' by Standard & Poor’s.
In addition to the primary Class A stack (which carries 38.33% subordination), S&P issued preliminary ‘AA’ ratings on two Class B tranches: the B-1 floating rate notes totaling $34.8 million, prices at Libor plus 250 bps; and the 3.93% fixed rate B-2 notes that are sized at $12 million. The deferrable Class C,D, and E notes adding up to $62.9 million are rated ‘A’, ‘BBB’ and ‘BB-’, respectively; and a $36.4 million equity slice is unrated.
The LCM CLO comes with a standard two-year call period, a 4.5 year reinvestment period and carries the common restrictions of 60% cov-lite loans in the pool, a limit of 5% debtor-in-possession bankruptcy loans and 10% of second-lien borrowings. The minimum overcollaterization figure on the Class A and B notes is 124.1% of the asset value.
The portfolio is heavily diversified, with 173 obligors in the collateral pool and the top 10 obligors comprising only 8.29% (or $33.17 million) of the total assets.
LCM was last in the market in October. The firm, founded in 2001 and owned by Tetragon Financial Group Ltd., manages over $6 billion in assets.
American Capital’s $405.8 million ACAS CLO IX transaction will issue two tranches of class A notes, according to a Moody’s Investors Service. The class A stack is divided between an ‘Aaa’-rated A-1 tranche totaling $268 million and a ‘Aa2’-rated A-2 tranche totaling $44 million. Both of the Class A tranches are floating rate: the A-1 pays Libor plus 158 basis points and the A-2 at Libor plus 240 basis points.
The CLO is the ninth issued by American Capital; it has not been in the market since August. The latest deal comes just two months after American Capital’s board of directors announced a strategic review that could involve the sale of the company or parts of its business lines.
ACAS CLO IX is backed primarily first-lien secured loans (90% of the portfolio) and will carry lower-risk collateral: the Moody’s weighted average rating factor (WARF) on the deal is 2661, compared to the higher-risk figures of other recent ACAS transactions like ACAS CLO 2014-1 (2774) and ACAS CLO 2013-2 (2820). Moody’s WARF figures are numerated representations of the underlying assets’ letter ratings, with higher figures denoting higher risk.
The initial Class A overcollateralization test of 128.2% is below that of the recent ACAS transactions, as well as for peer transactions such as Babson CLO Ltd. 2016-1 and Voya CLO 2016-1.
The ACAS CLO IX portfolio includes a one-year non call period and will carry no reinvestment period. The closing date on the transaction is April 15.
U.S. Bank is the trustee, and Citigroup the underwriter.
TELOS CLO 2016-7 is the seventh overall CLO for Telos Asset Management, a firm with $1.85 billion under management.
The $250 million par amount of the pool includes $156.5 million of class A notes stack with provisional ‘Aaa’ rating from Moody’s; the class A notes benefit from effective subordination of 37.$. Moody’s did not rate any of the subordinate notes.
The deal is restricted from carrying second-lien loans of any loans rated ‘Caa’ or lower by Moody’s; it also does not include a reinvestment period and will have initial overcollateralization of 159.7%. The closing date is April 2016. Nearly half of the portfolio (43.4%) is concentrated in five business sectors: healthcare and pharmaceutical; capital equipment; banking finance and insurance; business services and retial.
U.S. Bank serves as the trustee, and SG Americas Securities is underwriting the portfolio.