Apollo, Octagon, Babson prepare CLO offerings; market considers project finance CLOs

By Cristal Cody

Tupelo, Miss., Nov. 20 - Octagon Credit Investors, LLC, Babson Capital Management LLC and Apollo Credit Management LLC are expected to be back in the primary market with new collateralized loan obligation deals, according to informed sources.

Octagon Credit Investors is set to bring $713 million of notes in an upcoming CLO deal, while Babson Capital Management intends to offer $697.73 million of notes in a transaction, market sources said.

Apollo Credit Management is underway with plans for a $609 million CLO deal, according to an informed source.

About $70 billion of U.S. broadly syndicated cash flow CLOs have priced year to date, a market source said.

The CLO market could be poised to see a "comeback of the project finance (PF) CLO," according to a new report form Jay Grushkin, structured finance partner, and Dan Bartfeld, project finance partner, at Milbank, Tweed, Hadley & McCloy LLP in New York.

"The choppiness of the U.S. and global mergers and acquisitions markets (and consequently, the leveraged loan market) has limited the supply of loans in which CLO managers may invest," the report said. "Meanwhile, there is a serious call for project finance loans to fund exponential growth in infrastructure development needs. Project loans are perhaps the largest class of commercial loans that have not taken an active role in the CLO market, and the CLO provides a mechanism for monetizing this relatively illiquid class of loans."

Broadly syndicated CLOs usually are sponsored by an investment firm, while the sponsors of PF CLOs historically have been the banks that originated the project loan portfolios, according to the report.

Recent private placements and Rule 144A offerings of project debt in the institutional markets "show the appetite that non-traditional lenders have for project loans," the report said.

Octagon offers $713 million

Octagon Credit Investors intends to price $713 million of notes in the CLO deal via Citigroup Global Markets Inc., according to an informed source.

Octagon Credit Investors closed on the $417.78 million Octagon Investment Partners XVII, Ltd./Octagon Investment Partners XVII, LLC CLO transaction in August.

The New York City-based portfolio manager, an affiliate of private equity firm CCMP Capital Advisors, LLC, manages 11 CLOs.

Babson to price $698 million

Babson Capital Management expects to sell $697,725,000 of notes due December 2025 in the Babson CLO Ltd. 2013-II/Babson CLO 2013-II LLC offering, an informed source said.

The deal includes $415 million of class A-1 senior secured floating-rate notes (/AAA/); $97 million of class A-2 senior secured floating-rate notes (/AA/); $32 million of class B-1 deferrable floating-rate notes (/A/); $16 million of class B-2 deferrable floating-rate notes (/A/); $38 million of class C deferrable floating-rate notes (/BBB/); $29 million of class D deferrable floating-rate notes (/BB/); $10 million of class E deferrable floating-rate notes (/B/) and $60,725,000 of subordinated notes.

Citigroup Global Markets Inc. is the placement agent.

The notes have a two-year non-call period and a four-year reinvestment period.

Babson Capital Management will manage the CLO, which is backed by senior secured loans to broadly syndicated corporate borrowers.

Babson, in the primary market earlier in the year, closed on the $490.75 million Babson CLO Ltd. 2013-1 transaction in June.

The investment management firm is based in Boston, Springfield, Mass. and Charlotte, N.C.

Apollo eyes $609 million CLO

Apollo Credit Management is expected to sell $609 million of notes in the upcoming transaction, according to an informed source.

Wells Fargo Securities, LLC is the underwriter.

Apollo was in the market in August when it priced the $857.06 million ALM VII(R), Ltd./ALM VII(R), LLC CLO and the $932.22 million ALM VII(R)-2, Ltd./ALM VII(R)-2, LLC CLO transactions.

The firm is a subsidiary of New York City-based Apollo Global Management, LLC.

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