Trinitas Capital Management is CLO XXII is preparing to issue a $402 million in collateralized loan obligations (CLO), secured by a pool of senior secured, leveraged loans that are concentrated in the software industry.
At least 75.0% of the leveraged loan borrowers must be based in Canada or the United States, and no more than 60% of the loans can be considered covenant-lite, according to S&P Global Ratings, which plans to assign ratings to the notes.
There is some variation in the benchmarks of the underlying collateral and the notes that the trust will issue, as the industry continues to manage the shift away from Libor. They'll have to shift away from Libor in June 2023, when new rates will no longer be published. Mainly, all or some of the notes that Trinitas will issue are benchmarked over the Secured Overnight Financing Rate, S&P said. As for the collateral, meanwhile, the majority of the corporate loans are still paying a margin over LIBOR.
On average, the collateral in Trinitas CLO XXII has a lower portfolio turnover rate of 9.4% over the last 12 months, compared with 12.6%, according to S&P. Further, and on an average basis, Trinitas has an average overlap in collateral composition of 50.41%, which is lower than the average of 60.46% for all CLO 2.0 transactions rated by S&P.
Among the deal's main credit metrics is a total leverage level of 8.95%, and a 'BBB' subordination level of 13.03%. It has a weighted average (WA) cost of debt of 2.58%, which is higher compared with other broadly syndicated CLOs than deals rated in the three months leading up to March 31, 2023, said S&P.
The pool will have an average senior overcollateralization cushion of 10.33% at the transaction's closing date. Overall, however, S&P notes that the portfolio has a lower WA spread and lower available excess spread, which it says indicates a weaker underlying portfolio, from a cash flow perspective.
By press time, Trinitas Capital Management had $15 billion in total CLO assets under management.
