LCM Asset Management is marketing its third collateralized loan obligation of the year, according to Fitch Ratings.

LCM XX Limited Partnership will issue $509 million of notes backed by a portfolio of primarily senior secured loans issued by below investment grade companies.

The CLO will have an approximately five-year reinvestment period and a three-year non-call period.

The deal complies with U.S. rules, not yet in effect, that managers keep “skin in the game” of CLOs; an affiliate of, LCM Asset Management, the collateral manager, will retain, on an ongoing basis, 5% of the fair value of the notes and LP certificates as of the closing date.  The presale report does not identify the affiliate, but LCM Asset Management is owned by Tetragon Financial Group Limited, a closed-end investment company based in Guernsey.

Merrill Lynch, Pierce, Fenner & Smith Incorporated is the initial purchaser of the notes.

Fitch has assigned a preliminary ‘AAA’ to the $315 million senior tranche of notes to be issued by the CLO; the subordinate tranches are unrated. The notes are being marketed at a spread of three-month Libor plus 150 basis points. By comparison, the senior tranche of LCM’s previous CLO, which was completed in July, pays Libor plus 147 basis points.

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