Oaktree Capital Management has priced its second collateralized loan obligation of the year.

The $470 million Oaktree EIF 1 Series A will issue five tranches of floating-rate and fixed-rate notes with preliminary ratings from Moody’s Investors Service and Standard & Poor’s:  $298.8 million of class A notes have preliminary triple-ratings from both rating agencies and will pay three-month Libor plus 155 bps – slightly tighter than the 162 bps on Oaktree’s previous, $262 million deal, completed in January. The notes benefit from effective subordination of 38%. 

Oaktree has identified $372.3 million – or nearly 80% – of the intended collateral.  The diverse portfolio of 178 obligors has no single borrower comprising more than 1.51% of the total identified loan assets, and the top 5 industry groups in the portfolio representing 43.3% of the identified portfolio’s par amount, according to Moody’s. High tech industries represent 11.5% of the total.

Most of the companies are in the mid-B range of ratings, with 29.3% rated ‘B2’ by Moody’s and 27% rated ‘B2’. The portfolio has a maximum ceiling of 7.5% of ‘Caa’-rated loans, which will require Oaktree to acquire higher-rated loans in its targeted pool to reduce the share of Caa-rated assets totaling 9.1% in the identified portfolio.

The Class B and Class C notes in the capital stack are divided between floating rate and fixed-rate tranches. The $31 million in Class B-1 notes are priced at Libor plus 250 bps; the Class B-2 notes carry a fixed 3.67% coupon. Both are rated ‘AA’ by S&P with a 26.5% subordination.  For the Class C notes, the floating rate is Libor plus 365 bps for the $26.5 million Class C-1 category and a fixed 5.24% for the $10 million, Class C-2 notes. Both have 18.7% subordination.

There is also an unrated $88.1 million equity tranche, representing 18.7% of the portfolio’s capital structure. 

While larger than Oaktree’s previous deal in January, this one is smaller than in 2014 Oaktree EIF transactions that Moody’s used in comparison ($554.9 million in December 2014, $699.4 million in August 2014). Oaktree’s CLO deal from last September, Oaktree CLO 2015-1, offered up $511 million in notes.

The new CLO size is on par with other recently rated CLOs such as BlueMountain CLO 2015-3 ($450 million) and Cole Park CLO (December 2015 for $425 million).

The new Oaktree CLO carries a much shorter reinvestment period of only 2.6 years, which similar to the three-year reinvestment period for its January CLO is shorter than the standard four-year periods carved out for Oaktree’s 2014 and 2015 CLO transactions.

The CLO will hold a minimum of 96% first-lien senior secured loans, a maximum 4% of second-lien borrowings, and will hold no more than 80% covenant-lite loans. Oaktree will be prohibited from owning long-dated assets or accumulating more than 15% of international loans in the pool for the actively managed CLO.

The pool has a minimum overcollateralization of 125.4% on the A/B notes, and 114.7% on the C notes. Interest coverage tests start at 120% for the A/B notes, and 115% for the C notes.

New-York based OakTree, which maintains $100.2 billion in total assets under management including 75 of the largest 100 U.S. pension funds, has eight CLOs rated by Moody’s and six by S&P. 

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