Saratoga, BlueMountain price; deal pipeline grows; St Paul's to sell about €500 million

By Cristal Cody

Tupelo, Miss., Oct. 4 - About $14 billion of collateralized loan obligation transactions are in the deal pipeline, a market source said on Friday.

Coming up in the European primary market, Intermediate Capital Group plc plans to price about €500 million of notes in a CLO, an informed source said.

Year to date about $60 billion of CLOs have priced, including a refinancing deal over the week from Saratoga Investment Corp., sources said.

About 25% of CLO issuance is used to refinance existing CLO notes, according to one market source.

In other new issuance over the week, BlueMountain Capital Management LLC sold $413.25 million of notes in its third CLO of the year, in line with weaker market spreads, informed sources said.

BlueMountain CLO 2013-3 Ltd./BlueMountain CLO 2013-3 LLC priced with spreads that ranged from Libor plus 140 basis points on the AAA slice to Libor plus 550 bps on the B-rated tranche.

In June, the $428.75 million BlueMountain CLO 2013-2 Ltd./BlueMountain CLO 2013-2 LLC sold the AAA-rated tranche at Libor plus 125 bps and the B-rated notes at Libor plus 520 bps.

In April, the $514.2 million BlueMountain CLO 2013-1 Ltd./BlueMountain CLO 2013-1 LLC priced the AAA-rated slice at Libor plus 120 bps and a BB-rated tranche at the bottom of the capital structure at Libor plus 460 bps.

"While wider AAA spreads have recently made the arb less compelling for equity holders, slowing down primary issuance in the process, we believe AAAs will eventually compress," Bradley Rogoff, an analyst with Barclays, said in a note on Friday. "Beyond the temporary hurdle posed by wide AAAs, however, is the more considerable structural shift that will be required due to risk retention rules."

Saratoga raises $315 million

Saratoga Investment sold $314.9 million of notes due Oct. 20, 2023 in the Saratoga Investment Corp. CLO 2013-1, Ltd./Saratoga Investment Corp. CLO 2013-1, Inc. deal, which was a refinancing of existing debt issued by GSC Investment Corp. CLO 2007, Ltd., an informed source said.

The GSC Investment Corp. CLO will be renamed Saratoga Investment Corp. CLO 2013-1 as part of the transaction.

Saratoga Investment Corp. CLO 2013-1 priced $2.5 million of class X senior secured floating-rate notes (Aaa) at Libor plus 105 bps; $170 million of class A-1 senior secured floating-rate notes (Aaa) at Libor plus 130 bps; $20 million of class A-2 senior secured floating-rate notes (Aaa) at Libor plus 150 bps; $44.8 million of class B senior secured floating-rate notes at Libor plus 200 bps; $16 million of class C mezzanine deferrable floating-rate notes at Libor plus 290 bps; $14 million of class D mezzanine deferrable floating-rate notes at Libor plus 350 bps; $13.1 million of class E mezzanine deferrable floating-rate notes at Libor plus 450 bps; and $4.5 million of class F mezzanine deferrable floating-rate notes at Libor plus 575 bps; and $30 million of subordinated notes.

C&Co/PrinceRidge LLC was the underwriter.

Saratoga Investment is a New York-based business development company that provides financing for U.S. middle-market companies.

BlueMountain prices CLO

CLO manager BlueMountain Capital Management sold $413.25 million of notes due Oct. 29, 2025 in the BlueMountain CLO 2013-3 deal, according to an informed source.

BlueMountain CLO 2013-3 priced $255.25 million of class A senior secured floating-rate notes (Aaa/AAA/) at Libor plus 140 bps; $23.25 million of class B-1 senior secured floating-rate notes (/AA/) at Libor plus 185 bps and $15 million of 4.3% class B-2 senior secured fixed-rate notes (/AA/) at the top of the capital structure.

The CLO also sold $37.25 million of class C senior secured deferrable floating-rate notes (/A/) at Libor plus 270 bps; $20.25 million of class D senior secured deferrable floating-rate notes (/BBB/) at Libor plus 350 bps; $18 million of class E senior secured deferrable floating-rate notes (/BB/) at Libor plus 460 bps; $12.75 million of class F senior secured deferrable floating-rate notes (/B/) at Libor plus 550 bps; and $31.5 million of subordinated notes.

Credit Suisse Securities (USA) LLC was the placement agent.

BlueMountain Capital Management is a private investment company with offices in New York and London.

Intermediate Capital on tap

Intermediate Capital Group is expected to bring about €500 million in the St Paul's CLO III Ltd. European deal via J.P. Morgan Securities LLC, according to an informed source.

Intermediate Capital Managers Ltd., a subsidiary of Intermediate Capital Group, will manage the CLO.

The investment firm is based in London.

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