Morgan Stanley is arranging a $470 million CLO for LCM Asset Management.
The proposed deal, dubbed LCM XI Ltd., includes a $307 million tranche of A class of notes provisionally rated 'AAA' by Fitch Ratings, according to a presale report. Fitch said the credit enhancement of 34.7% for the class A notes is in line with recent vintage cash flow CLOs.
The CLO will have a four-year reinvestment period, scheduled to end in 2016. It is non-callable for two years.
At least 90% of the portfolio must be senior secured loans while unsecured and second lien loans and bonds in total cannot exceed 10.0% of the portfolio, with unsecured loans being further capped at 2.5% of the portfolio, according to the presale report.
The indicative portfolio is well above those limits; it consists of 98% senior secured loans and 2% second lien loans.