European CLOs in pipeline; H.I.G. sells $408.9 million; KKR Financial reopens CLO 2011-1

By Cristal Cody

Tupelo, Miss., Sept. 30 - New European collateralized loan obligation deals are expected in the near-term market, including Intermediate Capital Group plc's St. Paul's CLO III Ltd. transaction, according to an informed source.

Dublin-based Avoca Capital Holdings also has a €300 million CLO in the pipeline, sources said.

In the U.S. CLO market, H.I.G. Capital, LLC sold $408.9 million in the WhiteHorse VII Ltd./WhiteHorse VII LLC offering, according to a market source on Monday.

KKR Financial Holdings LLC said on Monday that it reopened the KKR Financial CLO 2011-1, Ltd. transaction to add $300 million.

The transaction "provides us with a highly attractive source of financing for loan collateral in an opportunistic structure that has generated approximately 15% annualized cash returns for KFN's shareholders over the last two years," Craig J. Farr, chief executive officer of KKR Financial, said in a release.

H.I.G. Capital prices

The WhiteHorse VII CLO priced tranches of notes due Sept. 15, 2025 that included $238.8 million of class A-1L senior secured floating-rate notes (/AAA/AAA) at Libor plus 140 basis points; $52.4 million of class A-2L senior secured floating-rate notes (/AA/AA) at Libor plus 200 bps and $31.2 million of class A-3L deferrable floating-rate notes (/A/A) at Libor plus 300 bps.

The CLO also sold $20 million of class B-1L deferrable floating-rate notes (/BBB/); $20.8 million of class B-2L deferrable floating-rate notes (/BB-/); $8.8 million of class B-3L deferrable floating-rate notes (/B/) and $36.9 million of subordinated notes. Additional pricing details were not immediately available.

RBS Securities Inc. was the placement agent.

H.I.G. WhiteHorse Capital, the credit affiliate of equity firm H.I.G. Capital, will manage the CLO.

The firm plans to use the proceeds to purchase a $400 million portfolio of primarily leveraged loans.

KKR reopens CLO 2011-1

KKR Financial Holdings said on Monday that the CLO entered into amendments to its existing secured financing transaction on Friday, according to an 8-K filing with the Securities and Exchange Commission.

The CLO 2011-1 now can borrow up to an additional $225 million at the same previously priced rate of Libor plus 135 bps. KKR Financial also purchased an additional $75 million of subordinated notes from the CLO.

The KKR Financial CLO 2011-1 will use the proceeds to purchase senior secured corporate loans.

The CLO originally closed on March 31, 2011 as a $400 million privately negotiated deal between the company and a third-party senior lender, according to KKR Financial. KKR Financial retained $100 million of mezzanine notes and subordinated notes in the transaction, the company said.

The CLO was reopened on July 6, 2011 to add $200 million, while KKR Financial increased its residual interest in the deal to $150 million from $100 million.

The total outstanding is $900 million.

New York-based KKR Financial Holdings has priced two new CLOs in the last year, including the $519.4 million KKR Financial CLO 2013-1, Ltd./KKR Financial CLO 2013-1, LLC deal in June and the $412 million KKR Financial CLO 2012-1, Ltd. in December.

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