Fifth Street brings $309.45 million middle-market CLO deal; secondary market active

By Cristal Cody

Tupelo, Miss., Feb. 2 – Fifth Street Management LLC brought a $309.45 million middle-market CLO deal, the year’s first offering in the space, according to an informed source on Monday.

The AAA-rated tranche of notes was placed at Libor plus 200 basis points.

Middle-market CLO issuance totaled $6.8 billion in 2014, according to BofA Merrill Lynch.

CLO secondary market activity picked up in the U.S. market over the previous week, according to BofA Merrill Lynch.

Bids-wanted-in-competition volumes totaled about $580 million and were dominated by U.S. CLO 2.0 and 3.0 deals, BofA Merrill Lynch analysts said in a note.

“Volcker compliant senior notes from the 2014 vintage traded fairly well as spread levels compressed to the low 150 DM for better-quality deals,” the analysts said. “A basis of about 15 [bps] remains between 2014 deals and those from earlier vintages which are not Volcker compliant. The market continues to scrutinize the level of energy concentrations in deals coming to the secondary market. Overall, spreads tightened by up to 10 [bps] from triple-A to triple-B.”

Fifth Street prices CLO

Fifth Street Management priced $309.45 million of notes due Jan. 20, 2027 in a middle-market broadly syndicated CLO offering, a source said.

Fifth Street Senior Loan Fund I, LLC sold $172.5 million of class A floating-rate notes at Libor plus 200 bps at the top of the capital structure.

At the bottom of the stack, the CLO priced $12 million of class F deferrable floating-rate notes at Libor plus 750 bps.

Wells Fargo Securities LLC was the placement agent.

Fifth Street Management will manage the CLO, which has a two-year non-call period and a four-year reinvestment period.

The transaction is backed primarily by a portfolio of middle-market senior secured loans.

Fifth Street Management is an alternative asset manager based in Greenwich, Conn.

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