PGIM is placing its first collateralized loan obligation offering of the year with an tilt toward lower-quality credits, as well as deferred interest across a large segment across the subordinate tranches of the $612 million transaction.
Dryden 47 Senior Loan Fund is the first broadly syndicated domestic CLO by PGIM since last August (Dryden 45).
Standard & Poor’s has assigned a preliminary ‘AAA’ structured finance rating to the $372 million Class A-1 tranche of notes that will carry a coupon of Libor plus 127 basis points. The notes carry 39.22% subordination from the more junior notes, as well – compared to the 145 basis point spread and 38% surbordination on Dryden 45.
In a presale report published Tuesday, S&P described a higher-than-average risk structure compared to other recent CLOs rated by the agency, including lower weighted average recovery rates and a higher scenario default rate indicative of lower-credit quality. The portfolio also includes lower weighted average spreads and available express spread levels that weaken the deal from a cash-flow perspective.
The cash flow waterfall includes the $30 million Class A-2 notes and the $41.4 million in Class B notes. PGIM is marketing five classes of deferrable notes totaling $117.6 million.
More than $426 million in collateral has already been identified. Under terms of the management agreement, PGIM has can fill up to 90% of the pool with covenant-lite loans.
The new deal is the first published pre-sale for a new-issue CLO for March, following $8.5 billion in new deals that priced in February. Refinancing deals (totaling $18 billion last month) has continued this week with PGIM also pricing a refi of its $565 million Dryden 34 Senior Loan Fund originally issued in 2014, and Credit Suisse getting new terms for its Madison Park Funding XIII deal (totaling $627 million). Benefit Street Partners also refinanced its CLO V deal on Wednesday, according to leveraged research from JPMorgan.