Tennenbaum ends MM CLO drought with $350.9M deal

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Alternative investment manager Tennenbaum Capital Partners broke a month-long dry spell of middle-market new-issue CLO activity by launching its first deal of 2017 in the $350.9 million TCP Whitney CLO.

The new TCP transaction, the third collateralized loan obligation managed by Tennenbaum, includes a $195 million AAA tranche priced at 168 basis points over three-month Libor.

The deal is rated by S&P Global Ratings and bond rating agency DBRS, which has previously rated Tennenbaum’s warehouse CLO that ramped up and seeded TCP Whitney.

The portfolio will be managed by a Tennenbaum affiliate, SVOF/MM LLC.

The deal is the first middle-market deal to price in August, following the absence of any deals in July, according to research from Wells Fargo structured finance (which would include privately placed CLO transactions).

The most recent middle-market CLO to price was Midland Capital Funding’s MCF CLO IV transaction in June (at Libor plus 172.5 basis points).

The middle-market CLO outlook has many healthy indicators brewing for it at the moment. Middle-market lending has jumped 23% to $79 billion in the first half of 2017, compared to the mid-year point in 2016, according to Thomson Reuters LPC.

Meanwhile, Moody’s Investor’s Service issued a research report Monday detailing how middle-market CLOs today enjoy fewer credit-quality deterioration issues than broadly syndicated CLOs, and are better preserving asset spreads. In the first quarter, for instance, as an avalanche of leveraged loan refinancings were tightening BSL CLO weighted average spreads by 16.1% or 71 basis points, SME CLO loans spreads only decreased by 38 basis points (or 6.5%).

"The private equity sponsors of many SME obligors are focused on raising new debt to fund mergers and acquisitions, rather than refinancing existing debt," Moody's report stated. Therefore, "the relatively small number of lenders and fewer loan refinancings account for the stickiness in SME loan spreads."

Tennenbaum’s CLO assets under management grow to $620 million with the issue of TCP Whitney CLO.

Tennenbaum provides financing of $25 million to $75 million for middle-market firms across 19 industry verticals, either with direct lending or special situations funding such as distressed investing.

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