Pinebridge Investments is returning to Europe’s collateralized loan obligation market for the first time since the financial crisis.
It’s latest deal, Euro-Galaxy III CLO, will issue 335 million of variable funding notes and floating-rate notes, according to a presale report published by Standard & Poor’s.
Barclays Bank is the arranger
The deal has two AAA-rated, super senior tranches with credit enhancement of 50.88% that are being marketed at euribor plus 130 basis points. One is a 67 million a variable rate note class, the other a 94 million floating-rate note class.
A $40 million, AAA-rated senior class has credit enhancement of 38.67% and is being marketed at three-month euribor plus 170 basis points.
As is common with recently issued European CLOs, the portfolio manager has the flexibility to purchase non-euro-denominated obligations, subject to an asset swap. The maximum bucket for unhedged obligations is 2.5%, subject to certain conditions, according to S&P. The manager also has some flexibility to put money to work in loans with loose financial maintenance covenants.
Less common is the ramp-up period in which the collateral manager can invest the proceeds of the issuance. To date, Pinebridge has identified 62.89% of the indicative portfolio. However, S&P expects only 60.0% of the portfolio to be acquired at closing. The manager will have another six months to meet the target collateral balance of 327.75 million.
S&P also notes that, under the transaction documents, the issuer may repay the total variable funding drawings outstanding by issuing further class A-1 notes, subject to certain conditions.
PineBridge Investments Europe will hold on to subordinated notes equivalent to 5% of the capital structure in order to meet regulatory requirements to align its interests with those of investors.
Pinebridge has brought two prior deals to market under the Euro-Galaxy moniker; Euro-Galaxy CLO II was issued in July 2007 and Euro-Galaxy CLO in September 2006.