Northwestern Mutual Life Insurance Co. is refinancing an existing $426.3 million CLO that was originally issued in December 2022 and pools broadly syndicated loans (BSLs).
S&P Global Ratings says in a recent presale report that the 720 East CLO 2022-I Ltd. transaction's five existing rated tranches, ranging from $272.0 million piece rated AAA to a $17 million portion rated BB-, are expected to be issued at a lower spread over three-month SOFR. A new $20.5 million tranche of notes also rated AAA is expected to be issued at 160 basis points over three-month term SOFR.
Led by J.P. Morgan Securities, the refinancing will extend the deal's reinvestment period to January 2030 and its stated maturity to January 2038, according to the S&P report. It adds that a concentration limit of 2.0% of long-dated obligations is being added to the transaction while the concentration limit for current-pay securities is being reduced to 5% from 10%.
S&P says that Northwestern Mutual manages five CLOs and had $2.6 billion in CLO assets under management as of October 31. The 720 East CLO's portfolio of loans has an average portfolio turnover rate of 21.51%, which is higher than the 19.69% average for all post-financial crisis CLO transactions that S&P rates. The deal has a concentration of loans in the hotels, restaurants and leisure industry, followed by media. Loans rated B and B+ are most prevalent in the pool, according to S&P.
Northwestern Mutual's most recent 720 East CLO transaction, totaling $403.7 million, priced October 18 and was led by Morgan Stanley, according to the Arizent database. The $281.3 million AAA portion priced at 136 basis points over three-month SOFR, while two smaller portions also rated AAA, for $24.7 million and $24 million, priced respectively at 136 basis points and 160 basis points over three month term SOFR.
