Good things, it seems come in threes, with three new CLOs in the works. Orix, Apollo Management and GSO Blackstone are arranging the three CLOs, sources said.
It couldn’t be determined which banks are underwriting the CLOs, but sources said they think the vehicles will launch in the coming weeks.
While these CLOs are positive for the leverage loan market, they lack the one quality market participants are really looking for: new loans.
These CLOs, like the Fraser Sullivan CLO that Citigroup priced late last month, are made up of refinanced loans, sources said. Only the appearance vehicles stocked with new primary market loans will signify the true rebirth of the CLO market.
The three new CLOs in the works are coming on the heels of a $525 million CLO Citi priced late last month. That CLO, COA Tempus CLO Ltd, is being managed by an affiliate of WCAS Fraser Sullivan Investment Management.
The Fraser Sullivan CLO consists of a $343.25 million tranche of triple-A-rated loans, a $15.75 million tranche of double-A-rated loans, a $38.25 million tranche of single-A-rated loans, and a $115.5 million equity portion, bringing the total to $512.75 million.
Fraser Sullivan purchased some the loans at a discount, which accounts for the discrepancy in value, a source familiar with the situation said.
The triple-A tranche priced with a coupon of Libor plus 235 basis points, according to Bloomberg. The double-A and single-A tranches have coupons of Libor plus 225 basis points and 250 basis points, respectively.
The double-A tranche priced at a discount of 94.252, while the single-A tranche priced at a discount of 90.717. The portfolio matures April 2019, with the reinvestment period ending April 2010.
WCAS Fraser Sullivan Investment Management was formed in 2007 with the backing of private equity firm Welsh, Carson Anderson & Stowe.