WhiteHorse gallops back in with first rated new-issue CLO in 3 years
WhiteHorse Capital is back in the saddle, issuing a publicly rated CLO for the first time since 2015, according to presale reports.
WhiteHorse, the credit arm of $24 billion-asset manager H.I.G. Capital, is marketing WhiteHorse XII Ltd., a $458.1 million broadly syndicated collateralized loan obligation. The offering consists of six classes of notes totaling $420 million.
It is the first rated CLO since $500 million WhiteHorse X BSL portfolio was issued in April 2015.
The senior notes in the capital stack – with preliminary AAA ratings from S&P Global Ratings – include a $6 million Class X series of interest-only notes and a Class A tranche of $283.5 million in notes paying principal and interest – the latter with a proposed coupon of 125 basis points over three-month Libor.
S&P also rated the $58 million in Class B notes (with a coupon of 200 basis points); the Class C notes totaling $29 million (rated A, with a spread of 267 basis points); $25 million in Class D bonds (BBB-, Libor plus 365 basis points) and $18 million in the double-B Class E tranche priced at a spread of 640 basis points.
The unrated residual notes total $38.1 million.
WhiteHorse XII is non-callable for two years and can be actively managed for up to five years.
Since WhiteHorse X was printed, the market has seen the coming and going of U.S. risk-retention rules put in place in December 2016 that intended to better align issuer and investor interests. But many managers in the industry complained the new standards to hold 5% notional skin in the game was impractical, and unsuitable, for CLOs given they were not originators.
Some ceased to print new deals, or connected with well-capitalized partners to sponsor deals and maintain the retention stakes – which could be $25 million on a $500 million portfolio.
But a D.C. Circuit Court of Appeals decision in February overturned the rules in a civil lawsuit filed by the Loan Syndications & Trading Association against federal regulators. After the decision went into effect in May, the market has seen a rise of debut deals from first-time or former CLO managers, and spurring a record-pace year for volume this year ($92.5 billion through Aug. 29, according to JPMorgan).
According to Wells Fargo, debut U.S. CLOs this year have included deals from Post Advisory Group, Kayne Anderson Capital Advisors, Partners Group and CarVal.
While dormant in new issuance, WhiteHorse has refinanced several deals in the past two years, including an extension of the WhiteHorse X portfolio in April, a year past its noncall period.
WhiteHorse Capital currently managed 10 CLOs with a combined $3.5 billion assets under management.