Primary quiet; Resource Capital brings $353.89 million CRE CLO; deal offers triggers

By Cristal Cody

Tupelo, Miss., July 16 – Primary action stayed light on Wednesday, while Resource Capital Corp. priced a $353.89 million static cash flow commercial real estate collateralized loan obligation offering, according to the company and market sources on Wednesday.

Resource Capital Corp. 2014-CRE2, Ltd./Resource Capital Corp. 2014-CRE2, LLC priced $196.42 million of class A floating-rate notes (Aaa) at Libor plus 105 basis points at the top of the capital structure in the transaction, the company said in a news release.

Wells Fargo Securities, LLC structured the deal.

The CLO does not have a reinvestment period, while broadly syndicated CLOs typically have a four-year reinvestment period.

The company chose to issue the notes as a CLO instead of as a commercial mortgage-backed security deal due to a couple of primary differences between the two structures, an informed source said.

“It depends on whether the issuer wanted it to be a CMBS or a CLO-type transaction,” the source said. “The primary differences in this case is this is static so it doesn’t have a reinvestment period. It’s different also because the Resource deal has triggers to provide protection to the senior tranches in the event the bonds don’t perform as expected. That’s something a CMBS structure would not have provided.”

The deal includes overcollateralization triggers, which, subject to transaction performance, divert interest proceeds to pay down the class A and class B notes, according to Moody’s Investors Service.

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