CLO issuance on tap; Salus sells $300 million; deal totals close in on 2013 target amount

By Cristal Cody

Tupelo, Miss., Sept. 23 - New CLO deals are expected to price over the week with the calendar likely to stay steady through the year, according to market sources.

"We think so," one CLO manager said.

In new CLO issuance, Salus Capital Partners LLC said on Monday that it reopened the Salus CLO 2012-1, Ltd./Salus CLO 2012-1, LLC transaction.

More than $54 billion of CLOs have priced year to date with market projections for about $60 billion to $70 billion of issuance for the year, sources said.

New transactions in the pipeline include a €300 million CLO from NIBC Bank NV, a $411.9 million CLO from H.I.G. Capital, LLC and a $400 million deal from Onex Corp., according to market sources.

CLO issuance and loan demand remains robust, though for how long is uncertain with the potential 5% risk retention rule that requires managers to retain a portion of the deal, according to Bradley Rogoff, an analyst with Barclays.

The finalized rule is not expected to take effect until 2015 or 2016.

"Duration risk has become a primary concern, leading to significant retail demand, and while CLO issuance volume is still in question over the longer term, new CLO supply has rebounded," Rogoff said in a note.

Salus prices add-on

Salus Capital Partners raised $300 million in the reopening of the Salus CLO 2012-1 CLO via Natixis Securities Americas LLC.

The deal includes class X senior secured floating-rate notes (DBRS: AAA); class A-2 senior secured floating-rate notes (DBRS: AAA); class B senior secured floating-rate notes (DBRS: AA); class C senior secured deferrable floating-rate notes (DBRS: A); class D secured deferrable floating-rate notes (DBRS: BBB); class E secured deferrable floating-rate notes (DBRS: BB); class F secured deferrable floating-rate notes (DBRS: B) and subordinated notes.

The notes are due March 5, 2021, except for the class X tranche, which is due March 5, 2015.

The securities rated AAA through BB, one class of unrated secured notes and the subordinated notes were placed with third-party investors and Salus affiliates, according to the company. As part of the transaction, Salus and its affiliates will contribute to the CLO about $167 million of their existing portfolio of loans.

Salus Capital Partners II, LLC is the CLO manager.

The current total outstanding is $550 million.

Needham, Mass.-based Salus Capital Partners is a subsidiary of the Harbinger Group, Inc. and provides asset-based loans to the middle market sector.

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