Zais offers $407.9 million CLO; larger deal sizes forecast; CLO investor base expands

By Cristal Cody

Eureka Springs, Ark., Sept. 21 – Zais Group, LLC plans to return to the CLO primary market for the second time in 2016 with a new CLO offering.

Zais intends to price $407.9 million of notes in a six-part CLO deal.

Looking to the rest of the year, larger CLO deal sizes are expected, Wells Fargo Securities, LLC analysts said in a note on Wednesday.

“We expect larger CLOs in Q4 2016, as managers and arrangers look to make up ground after limited issuance in H1,” the analysts said. “We also reiterate our outlook for increased reset volume in Q4, as investors/managers look to extend existing deals prior to the risk retention deadline.”

Risk retention regulations become effective on Dec. 24.

Market participants expect total U.S. CLO volume of $50 billion to $60 billion for the year, Moody’s Investors Service said in its September CLO report released on Wednesday, based on responses from the agency’s Sept. 8 CLO and Leveraged Loan Conference in New York.

“After a volatile first half of the year which depressed issuance volume, the CLO new issue market had a busy summer with record tight spreads across the capital structure driven by subsiding credit concerns and new investors’ reach for yield,” Moody’s said. “The investor base has expanded to include new investors from Asia (excluding Japan) and Europe. Underwriters are also increasingly customizing CLO structures to reflect investor preference, such as senior/subordinate Aaa tranches.”

Zais preps second deal

Zais Group plans to price $407.9 million of notes due Oct. 25, 2028 in the Zais CLO 5 Ltd./Zais CLO 5 LLC offering, according to a market source.

The transaction includes $260 million of class A-1 senior secured floating-rate notes (Aaa); $42.8 million of class A-2 senior secured floating-rate notes (Aa2); $25.2 million of class B senior secured deferrable floating-rate notes (A2); $21.6 million of class C senior secured deferrable floating-rate notes (Baa3); $18.4 million of class D secured deferrable floating-rate notes (Ba3) and $39.9 million of subordinated notes.

J.P. Morgan Securities LLC is the placement agent.

Zais Leveraged Loan Master Manager, LLC will manage the CLO.

The notes have a two-year non-call period and a four-year reinvestment period.

The CLO is backed primarily by broadly syndicated first-lien senior secured corporate loans.

Zais Group has priced one CLO year to date and brought one CLO deal to market in 2015.

The structured credit asset management firm is based in Red Bank, N.J.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.