INVESTCO Senior Secured Management Inc. last week closed a collateralized loan obligation transaction to fund two new investment vehicles - Avalon Capital Ltd. II and Avalon Capital Corp. II - but the group is still in the process of buying more loans.

Both CLO funds issued a portion of the two 12-year floating rate notes - $513 million of class-A notes, rated Aaa by Moody's Investors Service, and $85 million of class-B subordinated notes, rated Baa2. The deal was underwritten by PaineWebber.

Stephen Lioce, senior analyst at Moody's, said INVESCO's two new CLOs are similar in structure to Avalon Capital, which was formed in September 1999. However, more so than their predecessor, they will focus "overwhelmingly" on buying senior secured leveraged loans.

Even though the CLO transaction has closed, the two funds can continue to buy loans and issue liabilities for another four months because of a "ramp-up period" they are in, Lioce said.

Apparently, it's not too early for Moody's to assign the CLOs a rating without knowing the loans Avalon Capital has yet to acquire, either.

"We've been told the profile of the CLOs," said Lioce, and "it's not uncommon to rate [them] based on models of the portfolio."

Avalon Capital Ltd. II and Avalon Capital Corp. II are acting as co-issuers, with the former being an off-shore trust based in Cayman Island and the latter being a U.S. entity.

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