Napier Park Global Capital it preparing to price its first CLO in nearly 18 months through its Regatta platform in a $411 million transaction arranged through Morgan Stanley.

Rates and a closing date for the collateralized loan obligation have yet to be determined for Regatta VI  Funding, with only the $252 million Class A, triple-A tranche receiving expected ratings in a presale report from Fitch Ratings.

The loan is to be managed by a new Napier Park subsidiary, Regatta Loan Management LLC. Napier Park declined to comment on the reasons for the change from the previous Regatta V Funding that is managed by Napier Park Global Capital itself.

Napier is among the top 60 U.S. CLO managers, with CLO assets under management of approximately $2.9 billion in the fourth quarter of 2015.

The portfolio will consist almost entirely of first-lien senior secured loans, constituting 97.3% of initial assets. The indicative portfolio of assets includes 163 assets from 151 high-yield obligors for purchase by the manager to account for 78.5% of the targeted par amount. The report states another 43 obligors are lined up but have yet to be identified.  

CLO comes with a 4.2-year reinvestment period and a 2.2 year non-call provision.

The new Regatta portfolio is smaller than the Regatta V deal involving $460 million in notes (not including a $54.5 million equity tranche) backed by $500 million in senior loans. The Class A stack in the new issue is supported by 37% credit enhancement, compared to 35.5% for Regatta V.   

Overcollateralization on both the Class A and Class B notes is 123.2

Regatta VI has commonplace average rating of ‘B+/B’ in its indicative portfolio, but an initial weighted average rating factor (WARF) that is slightly more risky than the previous transaction but is less than then compared to other recent CLOs in the market issued since the fourth quarter of 2015. The target WARF is 2607 vs. 2575 of Regatta 5 and an average of 2726 for recent CLO deals.

The WARF is compiled by averaging the underlying ratings of the speculative-grade rated borrowers in the pool, using representative numbers to cover a range of rating strata (940 for ‘Ba1’, 1350 for ‘Ba2’, reaching to 10000 for ‘Ca-C”. A higher score is considered indicative of higher-risk assets in the pool).

The AAA spread in recent CLOs 159 bps over Libor, in range with the 156 bps spread for Regatta V in November 2014.

Fitch says the underlying assets have an 11% concentration in healthcare, 10.9% in business services and 9.7% in computer and electronics.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.