Voya Alternative Asset Management is eliminating the fixed-rate note classes in a $421.6 million refinancing of a 2016-vintage collateralized loan obligation.
According to a presale report published Wednesday by S&P Global Ratings, Voya is replacing and consolidating seven fixed- and floating-rate tranches in Voya CLO 2016-1 with a remaining balance of $381.8 million into five floating-rate classes totaling $384.1 million, each with lower interest rates than the original counterpart notes.
While it consolidates the stack of previously issued notes, it also is introducing a $1.6 million tranche of notes that pay only interest in eight quarterly installments of $200,000. The most subordinate tranche, known as the "equity, remains sized at $37.5 million, and will now serve to comply with risk-retention rules.
Voya is also altering terms to gain more flexibility in coverage tests on the portfolio, as well as extend the reinvestment period out to January 2023 and the expected life of the deal through 2027.
The replacement Class A-1-R notes are sized at $259.5 million, similar to the balance of the original Class A-1 notes but at a substantially lower rate of Libor plus 107 basis points, down from 150 basis points originally.
The new A-2-R notes – priced at 130 basis points above Libor – will replace the $32.5 million A-2 floating-rate (issued at 220 basis points over Libor) and the $20 million A-2B fixed-rate notes series that had a coupon of 3.92%.
The $31.6 million Class B notes also consolidate a split floating/fixed-rate tranche from the January 2016 deal at a lower rate (180 basis point plus Libor), while the Class C (265 basis points) and Class D (525 basis points) replacement notes both gained significant price reductions.
S&P stated is being leveraged at a ratio – 10.2x – well above the three-month average of 8.91x on other S&P-rated broadly syndicated CLOs. However, the average weighted cost of debt in Voya CLO 2016-1, now at 1.45%, beats peer-average figures of 1.59%.
The deal also has a tighter-than-average weighted average spread of 3.3% compared to an industry average of 3.57% the last three months.