Marathon overhauls 2013 CLO in third refinancing of the year

Marathon Asset Management will be refinancing one of its oldest actively managed collateralized loan obligations, according to S&P Global Ratings.

Marathon CLO V, a February 2013 vintage deal, is being renewed nearly eight months after the conclusion of its reinvestment period. As part of the refinancing, Marathon is giving itself until November 2019 to actively manage the deal.

A total of $607 million of replacement notes will be issued, including $369.3 million of Class A-1 replacement notes that pay Libor plus 87 basis points, according to S&P. The original notes were priced at Libor plus 132 basis points.

As a result, the weighted average spread, or the difference between interest rate paid on the notes and interest rate received on the deal's collateral, will be 4.22%. That is 65 basis points wider than the industry average portfolio of the previous three months. The deal will also result in an excess spread (or the weighted average cost of debt subtracted from WAS) was 2.86%, which is 100 basis points wide of the market norm of 1.86%.

While the rated par notes in the deal have been reduced to $522.7 million from the original $551 million, the CLO manager will inflate the equity size of the deal to $84.4 million from $63.3 million.

The deal is the third refinancing for Marathon this year. Its two prior transactions were more limited notes-replacement deals for a pair of 2014 CLO portfolios: the $364 million Marathon CLO VII that was refinanced in April at 132 basis points from 150; and the $386 million Marathon CLO VI deal that was reworked in May with a AAA coupon shaved to 125 basis points from 153.

The latest deal is expected to close this week, adding to the $6.2 billion in CLO refinancing activity this month, according to JPMorgan.

Among other refinancings this month were three deals that priced Monday, according to Thomson Reuters LPC.

As expected, Golub Partners priced a reset of its CLO 23 transaction at 120 basis points over Libor; Carlyle Group reset the $514 million 2013-2 Global Market Strategies at three-month Libor plus 89 basis points for the AAA tranche; and Credit Suisse repriced the $233.5 million in Class A replacement notes in the Jamestown CLO VII issued in 2015 at Libor plus 83 points.

Among new deals pricing Monday was Teachers Advisors LLC’s third CLO, the $459 million TIAA CLO III, with a AAA margin of Libor plus 115 basis points.

According to JPMorgan, U.S. CLO managers have issued $11.6 billion in primary deals this month.