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NXT Capital Plans $300M CLO

Middle market lender NXT Capital is prepping its first collateralized loan obligation.

NXT Capital 2012-1 is backed by $300 million of loans to small and medium enterprises, many of them already on NXT Capital’s books, according to a presale report by Moody’s Investors Service.

The deal includes a $173.5 million AAA tranche priced at three-month Libor plus 195 bps.

The transaction, which will free NXT Capital up to make more loans, is expected to close in May. At that time, 75% of the portfolio will be in place.

The CLO has a three-year reinvestment period that ends in July 2015; 97% of the collateral will be first-lien loans to small and medium business enterprises; no more than 3% will be second-lien debt.

Moody’s listed as a concern the deal’s “high” threshold for Caa-rated debt of 17.5% of the portfolio.

While this is NXT Capital’s first CLO, Moody’s said the lender’s management launched a middle market CLO while at Merrill Lynch in 2007.

The initial purchasers of notes issued by the trust are Wells Fargo Securities andBMO Capital Markets. Wells is also the trustee.

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