Babson CLO tranches price tightest since crisis; large managers may dominate Europe CLOs

By Cristal Cody

Tupelo, Miss., May 8 - Babson Capital Management LLC sold its triple A slice of its $490.75 collateralized loan obligation offering this week at Libor plus 110 basis points and sold its other tranches tighter than other CLOs since the market has re-emerged, according to an informed source on Wednesday.

"Across the capital structure, it was the tightest levels we've seen post-financial crisis," the source said. "The next big step is below Libor plus 110 [bps]. We've hit that a few times this year but haven't managed to get back past it. When that happens, it would be a positive sign for the market."

Higher-rated new CLO issuance is expected to hold in the 110 bps to 115 bps spread area, according to market sources.

Benefit Street Partners LLC reportedly priced its previously announced $506.9 million CLO.

Terms were not immediately available.

Benefit Street Partners sold its first CLO offering in a $459 million deal in September.

Coming up, the market expects a new CLO transaction from Columbia Management Investment Advisors, LLC, according to sources.

Morgan Stanley & Co. LLC is the underwriter.

Boston-based Columbia Management Investments Advisors sold a $370.5 million CLO earlier this year through Cent CLO 17 Ltd./Cent CLO 17 Corp.

"There's still plenty of U.S. deals getting done and in the pipeline," an informed source said.

The U.S. market remains the dominant space for CLOs, though reports of upcoming new deals in Europe continue to surface.

3i Group plc, Ares Management LLC, Intermediate Capital Group plc, Lloyds Banking Group plc, Alcentra Ltd., Carlyle Group LP, KKR Asset Management LLC and GSO Capital Partners LP all are expected to bring new European deals soon, sources said.

"We've seen a bit of a lull in that market for a while," one source noted. "The first priced in early February."

Cairn Capital Ltd. sold €300.5 million in the first European CLO priced since the financial crisis. Since then, Prameria Investment Management Ltd. sold a €300 million CLO and Apollo Global Management, LLC raised €325 million.

The European CLO market is reopening but only larger, well-established managers likely will bring new issuance in the months ahead, a source said.

"There's not really a lot of new guys entering the realm," the source said. "It's the largest-size managers entering back into the market."

Babson prices on tight end

Babson Capital Management sold its triple A slice of the $490.75 CLO offering this week at Libor plus 110 bps, tighter than initial guidance of 112 bps, according to an informed source on Wednesday.

The deal size for the notes due April 21, 2025 was downsized from $492.25 million.

Babson CLO Ltd. 2013-1 sold $290 million of class A senior secured floating-rate notes (Aaa); $65 million of class B senior secured floating-rate notes; $38 million of class C deferrable mezzanine floating-rate notes; $24 million of class D deferrable mezzanine floating-rate notes; $22 million of class E deferrable mezzanine floating-rate notes; $9 million of class F deferrable mezzanine floating-rate notes; and a $42 million equity tranche of subordinated notes.

Merrill Lynch, Pierce, Fenner & Smith Inc. was the underwriter.

Springfield, Mass.-based Babson Capital Management will manage the cash-flow CLO.

The deal will close on June 4.

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