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.

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.