Monroe Capital ABS Funding II is raising $378.4 million in a collateralized loan obligation deal, secured by a portfolio of mostly recurring revenue loans (65.2%) and middle-market loans (34.8%).
Jeffries & Co. and KeyBanc Capital markets are co-managers on the deal, according to the Asset Securitization Report deal database, which issues the notes through one floating-rate tranche and four fixed-rate tranches, according to Kroll Bond Rating Agency. The floating-rate tranche is benchmarked to the three-month Secured Overnight Financing Rate (SOFR).
Based on ASR deal data base, spreads were 280 basis points over the SOFR for the most senior tranche, while other spreads ranged from 280 to 700 bps over.
The rating agency notes that the issuer is an affiliate of Monroe Capital, a firm that currently has $4.4 billion in middle-market CLOs under management across about 13 outstanding transactions. Some 76 underlying issuers are in the deal, which has a two-year reinvestment period, KBRA said.
Monroe Capital ABS Funding generates its credit enhancement internally through subordination, its borrowing base and excess spread. One of the most detailed forms of credit enhancement on the deal is a borrowing base trigger event provision. A borrowing base condition exists for each class of debt, according to KBRA. It will be satisfied if the aggregate outstanding amount of debt is less than or equal to the borrowing base for the related debt class. If the borrowing base doesn't meet this condition, the transaction will deposit interest or principal, or both, into the principal collection subaccount. The transaction will use those particular deposits to repay the notes in sequential order until the advance rate is no greater than the applicable amount, according to the rating agency.
KBRA expects to assign 'AAA' ratings to classes A-L and A-1, both of which have an advance rate of 44%. Only the A-L class is benchmarked to the three-month SOFR.
Otherwise, KBRA expects to assign 'A+' to the class B notes; 'A-' to the class C notes; and 'BBB' to the class D notes.
