CLOs set for record year; Sankaty, Ares bring deals; NewStar middle market CLO closes

By Cristal Cody

Tupelo, Miss., July 1 – The U.S. CLO market is “on pace for [a] record year of issuance” following a surge of deals in June, Moody’s Investors Service said in a report on Tuesday.

About $70 billion of CLOs have priced globally year to date, while more than $14 billion of CLOs priced in June, according to data compiled by Prospect News.

CLO AAA-rated notes had “lingered” around the Libor plus 150 bps area over the first five months of the year, Moody’s said in the report.

“The spreads were sticky until June, when they started to tighten,” Moody’s said.

Sankaty Advisors LLC priced a $415.25 million CLO deal and placed the AAA-rated tranche at Libor plus 146 basis points, according to a market source.

In other new issuance, additional details emerged for Ares Management Ltd.’s European CLO offering.

The firm priced the AAA-rated tranche of notes at Euribor plus 135 bps, a source said.

Sankaty prices CLO

Sankaty Advisors priced $415.25 million of notes due 2026 in a CLO transaction, according to a market source.

Avery Point V CLO Ltd./Avery Point V CLO Corp. sold $2 million of class X floating-rate notes (//AAA/) at Libor plus 100 bps $152 million of class A floating-rate notes (//AAA) at Libor plus 146 bps and $100 million of class A floating-rate loans (//AAA) at Libor plus 146 bps.

The CLO priced $43.5 million of class B floating-rate notes at Libor plus 210 bps; $24.5 million of class C floating-rate notes at Libor plus 310 bps; $25 million of class D floating-rate notes at Libor plus 350 bps; $25 million of class E floating-rate notes at Libor plus 490 bps; $5 million of class F floating-rate notes at Libor plus 550 bps and $38.25 million of subordinated notes.

GreensLedge Capital Markets LLC was the placement agent.

Sankaty Advisors will manage the CLO, which is backed primarily by senior secured loans.

Proceeds from the deal will be used to purchase assets to reach a target portfolio of about $400 million of leveraged loans.

Sankaty Advisors was last in the primary market in March with the $727.5 million Avery Point IV CLO Ltd./Avery Point IV CLO Corp. deal. The firm also refinanced the $362 million Race Point V CLO, Ltd. transaction in February.

The Boston-based credit investment unit of Bain Capital LLC priced two CLOs in 2013.

Ares raises €351.85 million

Ares Management raised €351.85 million in a previously announced European CLO offering, according to a market source.

Ares European CLO VII Ltd. priced €207.4 million of class A-1 senior secured floating-rate notes (Aaa//AAA/) at Euribor plus 135 bps, €23.3 million of class A-2A senior secured floating-rate notes (Aa2//AA+) at Euribor plus 200 bps and €11.3 million of 3.1% class A-2B senior secured fixed-rate notes (Aa2//AA+).

The CLO sold €20.4 million of class B senior secured deferrable floating-rate notes (A2//A+) at Euribor plus 245 bps; €14.2 million of class C senior secured deferrable floating-rate notes (Baa2//BBB+) at Euribor plus 330 bps; €28.3 million of class D senior secured deferrable floating-rate notes (Ba2//BB) at Euribor plus 490 bps; €11.3 million of class E senior secured deferrable floating-rate notes (B2//B-) at Euribor plus 550 bps and €35.65 million of subordinated notes.

Citigroup Global Markets Inc. arranged the transaction.

Ares Management will manage the CLO.

The CLO is backed primarily by secured senior obligations.

The notes are due Aug. 15, 2028.

Proceeds from the deal will be used to purchase a €340 million portfolio of European leveraged loans and bonds.

Los Angeles-based Ares Management was last in the European primary market in July 2013 with the €310.5 million Ares European CLO VI Ltd. transaction.

NewStar closes

NewStar Financial, Inc. announced on Tuesday that it closed on the previously reported $409,417,000 middle market CLO transaction that priced in a private placement offering via Rule 144A and Regulation S on June 5.

The NewStar Arlington Senior Loan Program LLC transaction arranged by Wells Fargo Securities, LLC closed on Thursday.

NewStar said the deal was structured with several innovative features including a class of step-up notes to “meet specific investor demand.”

At the top of the structure, the CLO sold $193.5 million of class A-1 senior secured floating-rate notes (Aaa) at Libor plus 175 bps and $40 million of class A-2 senior secured floating-rate notes (Aaa) at Libor plus 153 bps, which step up to Libor plus 198 bps after 24 months.

Third-party program investors retained the equity tranche of $40,667,000 of subordinated notes, which represented about 10% of the capital structure, according to the release.

The notes offered in the CLO are backed by a diversified portfolio of commercial loans originated by NewStar.

NewStar Financial said in the release that it had increased the size of the offering from $300 million to $400 million and completed the term debt securitization to provide leverage for the NewStar Arlington Senior Loan Program.

The offering was NewStar's ninth securitization since the firm opened in a partnership with institutional investors in April 2013 to co-invest in middle market commercial loans originated by NewStar.

“With NewStar's well-established position as a programmatic, middle market CLO issuer and the market's strong receptivity to the deal, we were able to structure a transaction with competitive cost of funds and a robust structure that achieves our investors' objectives,” John Frishkopf, head of asset management and treasury at NewStar, said in the statement. “It represents the second CLO NewStar executed in 2014.”

Boston-based NewStar Financial also was in the primary market in April with the $348.4 million NewStar Commercial Loan Funding 2014-1 LLC transaction.

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