Octagon Credit Partners is preparing to manage a $410 million collateralized loan obligation with secured leveraged loan collateral, and that gives the manager flexibility to choose certain combination of covenants to manage the portfolio.
RBC Capital Markets is arranger on the transaction, which is slated to close on May 22, according to ratings analysts from Fitch Ratings. Octagon 63, the name of the deal, comes to market with a five-year reinvestment period, and a two-year non-call timeline, Fitch said.
When looked at by industry concentrations, Octagon 63 has 289obligors are in the pool, representing 309 assets, and general business services account for the largest share of loans, at 14.4%, the rating agency said. After that industrial and manufacturing, banking and finance, technology software and telecommunications account for 8.5%, 8.2%, 7.4% and 5.5%.
Due to mature in July 2037, the notes are benchmarked to the three-month Secured Overnight Financing Rate.
The top five issuers in the pool represent 4.73% of the pool, which is noticeably more diversified compared with the 12.50% concentration, according to Fitch's stressed portfolio at initial expected matrix point. On a weighted average (WA) basis and excluding defaults, the underlying contracts have a life of 59.6 months, shorter than the 96 months seen in the matrix, but a slightly higher recovery rate, at 73, compared with 72.
Virtually all of the loans are first lien, slightly less than the full-slate of first-liens Fitch reported in the comparison group, with no defaults reported by the transaction's cutoff date.
Octagon 63 will issue class A through F notes through seven tranches, according to Fitch.
Fitch will assign ratings of AAA to the A1 and A2 notes; AA to the B notes; A to the C tranches; BBB- to the class D notes; BB- to the class E notes and B- to the F tranche, according to Fitch.
