Morningside Park CLO is in the market with a $400 million arbitrage cash flow transaction that will be managed by GSO / Blackstone Debt Funds Management.

The net proceeds from the note issuance, according to a Fitch Ratings presale report, will be for buying around a $399 million portfolio of leveraged loans.

The six-part deal, which includes a $265 million triple-A rated tranche, has a two-year reinvestment period for all asset sales, repayments and prepayments, Fitch said. The portfolio will be actively managed.

The rating agency said that the indicative portfolio weighted average rating is ‘B'/'B-’, which shows relatively weak credit quality. However, the firm said that the class A notes rating will probably not be negatively affected by foreseeable levels of defaults. The notes, according to the rating agency, are robust against default rates of up to 57%.

The indicative portfolio comprises 95.5% senior secured loans and 4.5% second lien and unsecured loans, Fitch said.

Approximately 84.2% of the loans are classified as having either strong recovery prospects or a Fitch-assigned recovery rating of ‘RR2’ or higher. 

The portfolio will be bound by concentration limitations that address the various loan characteristics. These limitations minimize the deal's exposure to certain risky qualities such as ‘CCC’ ratings, second lien loans, and individual obligor concentration. 

GSO Capital Partners, Blackstone's credit business, has over $24 billion of assets under management, It specializes in CLOs and credit-oriented funds, such as leveraged loans, special situations, mezzanine, distressed, secondary market and rescue financing credit strategies.

Blackstone’s other alternative asset management businesses include the management of private equity funds, real estate funds, funds of hedge funds, and closed-end mutual funds.

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