American Capital brings $552.4 million risk compliant CLO; Europe, middle market active

By Cristal Cody

Tupelo, Miss., May 6 – American Capital, Ltd. raised $552,455,000 of notes in a U.S.- and European-risk retention compliant CLO deal, according to the company and a market source on Wednesday.

“We are pleased to announce our sixth CLO transaction post the credit crisis and our seventh overall,” Mark Pelletier, president of American Capital CLO Management, LLC and president of American Capital Senior Floating, Ltd., said in a news release. “ACAS 2015-1 was structured in an effort to comply with both European and impending U.S. risk retention rules, allowing us to continue to attract repeat as well as new investors to our platform.”

Fitch Ratings said in a risk retention survey report on Wednesday that U.S. CLO managers will continue to actively issue CLOs while meeting upcoming risk retention requirements through a wide range of approaches.

“U.S. CLO managers do not appear to have a one-size-fits-all preferred approach to meeting U.S. risk retention requirements,” Fitch senior director Gioia Dominedo said in a news release. “Not only are multiple approaches being considered, but half of the managers stated that they plan to vary their approach on a deal-by-deal basis.”

According to the report, managers are considering all possible solutions, including using a majority-owned affiliate of the manager or a newly created manager.

“Despite the challenges associated with meeting risk retention requirements, all CLO managers surveyed intend to issue new deals over the next two years,” Dominedo said in the release. “In fact, managers are not only considering the upcoming U.S. risk retention rules but are also often addressing existing European risk retention requirements in their deals.”

According to the survey, 15% of managers responded that they are structuring all new deals to comply with European regulations.

In other primary activity, Partners Group (UK) Management Ltd. brought a €414.1 million CLO deal.

In the middle-market space, Fifth Street Senior Floating Rate Corp. priced a $308.98 million CLO transaction.

American Capital settles deal

American Capital sold and closed on $552,455,000 of notes due April 18, 2027 in the ACAS CLO 2015-1, Ltd. deal, according to the company and a market source on Wednesday.

The CLO priced $331.95 million of class A-1 senior secured floating-rate notes at Libor plus 149 basis points in the senior tranche.

Deutsche Bank Securities, Inc. arranged the offering.

American Capital CLO Management will manage the CLO.

The CLO has a two-year non-call period and a four-year reinvestment period.

Collateral consists primarily of broadly syndicated first-lien senior secured corporate loans.

American Capital CLO Management purchased $29.53 million of the non-rated subordinated notes, and third-party investors purchased the remaining $16 million.

The retention of a control equity investment by American Capital CLO Management, LLC is intended to make ACAS CLO 2015-1 compliant with risk retention rules for credit institutions regulated in the European Economic Area.

Proceeds from the deal were invested mainly in broadly syndicated senior secured floating-rate loans purchased in the primary and secondary markets.

American Capital CLO Management is a subsidiary of American Capital Asset Management, LLC, which manages about $3.3 billion of loan and loan-related assets in seven American Capital CLOs.

American Capital is a Washington, D.C.-based private equity firm and global asset manager.

Partners Group (UK) prices

Partners Group (UK) Management brought a €414.1 million offering of notes due May 30, 2028, according to a market source.

Penta CLO 2 BV sold €234 million of class A senior secured floating-rate notes at Euribor plus 130 bps at the top of the capital structure.

BofA Merrill Lynch was the placement agent.

Partners Group will manage the CLO.

The notes have a non-callable period that ends in 2017 and a reinvestment period that ends in 2019.

The CLO is backed primarily by euro-denominated senior secured obligations.

Proceeds will be used to purchase a €400 million portfolio of mostly European leveraged loans and bonds.

The deal is the first CLO in the Penta series since 2007. Partners Group brought the Penta CLO SA in 2007.

Partners Group is a London-based private markets investment manager.

Fifth Street brings CLO

Fifth Street Senior Floating Rate priced $308.98 million of notes due April 13, 2025 in a middle-market CLO deal, a source said.

FS Senior Funding Ltd./FS Senior Funding CLO LLC sold $126 million of class A-T1 floating-rate notes at Libor plus 180 bps in the AAA-rated tranche.

Natixis Securities America LLC arranged the transaction.

The CLO manager is Fifth Street Senior Floating Rate Corp.

The CLO is non-callable until May 28, 2017. The reinvestment period ends May 28, 2019.

The deal is collateralized by a revolving pool of middle-market senior secured corporate loans.

Fifth Street Senior Floating Rate is a public business development company owned by Greenwich, Conn.-based Fifth Street Asset Management Inc.

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