Octagon Credit Investors is preparing its second collateralized loan obligation of the year, according to a presale report published by Fitch Ratings

Net proceeds from the deal, Octagon Investment Partners XX, will be used to purchase a portfolio of approximately $600 million of primarily senior secured leveraged loans.  The indicative portfolio consists of 94.2% first lien senior secured loans.

Of the six tranches of notes to be issued, the $384 million class A notes were the only tranche to receive ‘AAA’ preliminary ratings from Fitch.  The notes will benefit from a 36.0% credit enhancement. 

The deal has a standard two-year non-call period and a four year reinvestment period.

J.P Morgan Securities is the arranger and placement agent for the deal.

Octagon issued its first CLO of the year, the $550 million Octagon Investment Partners XIX, in April.  Fitch rated the $346.5 million class A notes ‘AAA,’ benefiting from a 37.0% credit enhancement.  The deal also has a two-year non-call period and four-year reinvestment period.

Octagon, founded in 1994 to manage the in-house, buy-side leveraged loan and high-yield bond business of Chemical Bank, specializes in below-investment-grade leveraged loans and high-yield bonds.  As of December 31, 2013, Octagon had $7.9 billion in assets under management.

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