PGIM shortens reinvestment window in $1B CLO refinancing
PGIM is getting a price break in a second refinancing of a $1 billion CLO, but is also taking six months off the existing reinvestment period for the underlying loan portfolio.
According to S&P Global Ratings, PGIM is pricing the replacement senior notes of Dryden 33 Senior Loan Fund at just 123 basis points over Libor. That rate is 20 basis points tighter than the existing rate PGIM received in the first refinancing in November 2016, and 10 basis points inside the average spread that new-issue deals averaged in February for triple-A notes.
But Dryden also agreed to an abridged reinvestment period that shortens the deadline to April 2021 from October 2021. PGIM had applied a five-year reinvestment window when it refinanced the 2014-vintage deal in 2016, but the new transaction will limit that period to approximately two years after closing.
Dryden 33 continues a 2019 trend of CLO managers gaining more favorable spreads from investors on deals with more limited reinvestment and noncall periods.
The original 2014 portfolio had a July 2018 reinvestment deadline for PGIM to buy and trade loan assets for collateral quality improvement. It was also originally sized at $734 million, but was upsized in the first refinancing.
The second refinancing will shift the existing noncall period ahead nearly a year to April 2020. The transaction will also introducing a $3.95 million in Class F subordinate notes, a single-B rated tranche that was not included in either the original Dryden 33 portfolio of the refinanced transaction.