DFG preps for second CLO offering; Europe CLO issuance in 2013 expected to climb

By Cristal Cody

Tupelo, Miss., Aug. 12 - DFG Investment Advisers, Inc. set deal details for its previously announced second collateralized loan obligation, according to a market source on Monday.

The firm plans to sell $367.9 million in the Vibrant CLO II Ltd./Vibrant CLO II LLC transaction, slightly more than the $317 million Vibrant CLO, Ltd. offering it sold in December.

Elsewhere in the CLO market, European issuance is expected to be higher than initially thought on the back of two issues sold in the previous week and more deals in the pipeline, sources said.

"Indeed, European CLO issuance has turned out to be much higher than we had expected at the beginning of the year - our abase case was €2-3 billion and bull case for 2013 was €5 billion," said Vishwanath Tirupattur, an analyst at Morgan Stanley & Co. LLC. "So, it has been far higher than we had initially forecast, and I won't be surprised [if] it turns out to be higher than our bull case."

In the previous week, 3i Debt Management Investments Ltd. sold the €309.6 million Harvest CLO VII Ltd. offering, while Haymarket Financial LLP priced €397.75 million in the HayFin Ruby II Luxembourg SCA dual-currency CLO, according to informed sources.

The deals brought total CLO issuance in Europe year to date to nearly €4 billion.

More than €1 billion of new European CLOs are coming up in the near-term pipeline, including an offering from Pramerica Investment Management Ltd., according to market sources.

The European market had been expected to see about €5 billion of total CLO issuance for the year.

European CLOs sold over the summer have priced AAA-rated tranches in a range of Euribor plus 125 basis points to Euribor plus 155 bps, sources said.

3i sold €177 million of its AAA-rated tranche at Euribor plus 135 bps. Haymarket priced its euro and sterling class A tranches of €81.9 million and £81.9 million each at Euribor/Libor plus 155 bps.

DFG firms details

DFG Investment Advisers plans to price nine tranches of fixed-rate, floating-rate and subordinated notes due 2024, according to a market source on Monday.

The Vibrant CLO II deal includes $214.8 million of class A-1 floating-rate notes (/AAA/); $35.1 million of class A-2A floating-rate notes (/AA/); $10 million of class A-2B fixed-rate notes (/AA/); $28.9 million of class B deferrable floating-rate notes (/A/); $18.8 million of class C deferrable floating-rate notes (/BBB/); $16.4 million of class D deferrable floating-rate notes (/BB/); $11.4 million of class E deferrable floating-rate notes (/B/); $1 million of class M deferrable floating-rate notes and $31.5 million of subordinated notes.

Deutsche Bank Securities Inc. is the underwriter.

The deal is expected to close on Sept. 12.

DFG, a New York City-based money manager, is the CLO manager.

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