CVC sells $625 million CLO; Babson closes $697.73 million deal; LSTA webcast draws crowd

By Cristal Cody

Tupelo, Miss., Dec. 18 - Details on new collateralized loan obligation securitization deals priced by Babson Capital Management LLC and CVC Credit Partners, LLC emerged on Wednesday.

Babson Capital Management sold a $697,725,000 CLO offering, while CVC Credit Partners brought a $625 million CLO fund, market sources said.

Nearly $80 billion of U.S. CLO transactions have priced in 2013, with a handful of deals still likely to price before the year closes, according to sources.

Lingering questions on the Volker Rule issued on Dec. 10 attracted about 450 people to the Loan Syndications and Trading Association webcast on Wednesday, said Elliot Ganz, general counsel of the LSTA.

The rules, part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, prohibit banks from short-term proprietary trading and impose limits on banks' investments in hedge funds or private equity funds.

CLOs that do not hold securities are exempt from the Volcker Rule. Under the final rule, CLOs that do hold securities are considered covered funds and banks cannot hold ownership interests in them.

However, "ownership interests" is broadly defined to include even debt securities that have certain indicia of ownership, such as the right to replace managers, Ganz said in an interview following the webcast.

"AAA securities typically have these rights, which is why banks would not be able to hold them if the CLO holds securities," he said.

CLOs with securities will not be grandfathered in under the rule.

About 60% of existing CLOs hold securities, according to LSTA's data.

"Virtually all CLOs done until last week had securities baskets of up to 10%, meaning that 90% of the assets had to be loans but up to 10% of the assets could be invested in high-yield bonds or floating-rate notes," Ganz said. "Most of the CLOs that do hold securities hold a relatively small percentage, in the 1% to 2% range."

The Federal Reserve has set bank compliance by July 21, 2015, but concern continues on what banks do with the AAA-rated CLO notes in the interim.

"We've definitely not seen a lot of selling of triple A notes, and that's prudent," Ganz said. "People are taking a pretty measured view of it. We're likely to have much more clarity in the next few weeks, so it probably makes sense for banks holding these notes to hold on and see how the market and perhaps the agencies deal with it."

The LSTA is talking with market participants and contemplating drafting a letter to regulatory agencies for clarification on the rule.

The webinar presenters included Gail Bernstein, a partner at Wilmer Cutler Pickering Hale and Dorr law firm; Dave Preston, CLO analyst at Wells Fargo Securities, LLC; Ganz and Bram Smith, executive director of the LSTA.

Babson closes deal

Babson Capital Management raised $697,725,000 in the CLO fund via Citigroup Global Markets Inc., according to a market source.

Babson CLO Ltd. 2013-II/Babson CLO 2013-II LLC priced $415 million of class A-1 senior secured floating-rate notes (Aaa/AAA/) at Libor plus 148 basis points; $97 million of class A-2 senior secured floating-rate notes (/AA/) at Libor plus 175 bps; $32 million of class B-1 senior secured deferrable floating-rate notes (/A/) at Libor plus 265 bps; $16 million of 5.1% class B-2 senior secured deferrable fixed-rate notes (/A/); $38 million of class C senior secured deferrable floating-rate notes (/BBB/) at Libor plus 325 bps; $29 million of class D senior secured deferrable floating-rate notes (/BB/) at Libor plus 450 bps; $10 million of class E senior secured deferrable floating-rate notes (/B/) at Libor plus 525 bps and $60,725,000 of subordinated notes.

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

Babson was last in the market with the $490.75 million Babson CLO Ltd. 2013-1 transaction in May.

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

CVC prices $625 million

CLO manager CVC Credit Partners priced $625 million of notes due Jan. 19, 2025 in the Apidos CLO XVI/Apidos CLO XVI LLC deal, according to market sources.

Apidos CLO XVI sold $3.75 million of class X senior secured floating-rate notes (Aaa/AAA/) at Libor plus 100 bps and $383 million of class A-1 senior secured floating-rate notes (Aaa/AAA/) at Libor 145 bps at the top of the capital structure.

The CLO also priced $34.5 million of class A-2A senior secured floating-rate notes (/AA/) at Libor plus 170 bps; $30 million of 4.0025% class A-2B senior secured fixed-rate notes (/AA/); $46 million of class B mezzanine deferrable floating-rate notes at Libor plus 280 bps; $31.25 million of class C mezzanine deferrable floating-rate notes (/BBB/) at Libor plus 325 bps; $27.5 million of class D mezzanine deferrable floating-rate notes (/BB/) at Libor plus 450 bps; $15 million of class E mezzanine deferrable floating-rate notes (/B/) at Libor plus 575 bps and $54 million of subordinated notes.

Credit Suisse Securities (USA) LLC arranged the deal.

CVC Credit Partners, the credit management arm of London-based private equity firm CVC Capital Partners Ltd., was last in the market with the $512.7 million Apidos CLO XV/Apidos CLO XV LLC deal in October and the $617.36 million Apidos CLO IV/Apidos CLO XIV LLC transaction in June.

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