Valcour to sell $259.95 million CLO; Dryden 30 closes; European CLOs deleverage 'rapidly'

By Cristal Cody

Tupelo, Miss., Oct. 22 - The new deal pipeline includes a $259.95 million collateralized loan obligation transaction from Valcour Capital Management LLC, according to a market source.

About $14 billion of new CLO deals are in the pipeline, according to market sources.

In other CLO market activity on Tuesday, Prudential Fixed Income said the $516.4 million Dryden 30 Senior Loan Fund/ Dryden 30 Senior Loan Fund LLC CLO sold in September has closed.

Prudential Fixed Income, the principal public fixed income management business of Prudential Financial, Inc., is the collateral manager.

"The Dryden 30 Senior Loan Fund is the eighth new CLO to be issued globally under the Dryden brand within the last two years and the 46th cash or synthetic CLO/CDO structure to be managed or sub-advised by either or both of the Prudential fixed income teams in its Newark and London offices," Prudential said in a statement.

The Dryden 30 CLO deal closed on Oct. 15.

Valcour preps $259.95 million

Valcour Capital Management's deal includes $259.95 million of notes due Dec. 29, 2023, according to a market source.

The Crown Point CLO II, Ltd./Crown Point CLO II, LLC plans to price $157.8 million of class A-1L senior secured floating-rate notes (Aaa//); $20.8 million of class A-2L senior secured floating-rate notes; $19.8 million of class A-3L senior secured deferrable floating-rate notes; $18.2 million of class B-1L senior secured deferrable floating-rate notes; $10.9 million of class B-2L senior secured deferrable floating-rate notes; $6.8 million of class B-3L senior secured deferrable floating-rate notes and $25.65 million of subordinated notes.

RBS Securities Inc. is the underwriter.

The deal is expected to close on Nov. 11.

Valcour Capital Management is a Stamford, Conn.-based investment firm.

European CLOs deleverage

Fitch Ratings said on Tuesday in a report that European leveraged-loan CLOs are "deleveraging more rapidly than might be expected after their reinvestment period ends."

Excluding older deals with looser reinvestment criteria, most CLO portfolios have repaid close to 20% of their liabilities one year after their reinvestment period ended, the agency said.

"This is surprisingly high, considering that the low cost of funding, which reflected market conditions when pre-crisis CLOs were originally priced, incentivizes CLO managers to leave senior notes outstanding and keep transactions at maximum leverage," Fitch said. "It is also surprising given the degree of amend and extend activity (up to 34% of CLO obligations), reflecting a perceived lack of refinancing options."

Fitch said one reason is that some loans have been refinanced in the European high-yield market, which is on pace for a new annual issuance record in 2013.

"CLOs that incorporated ratings in their reinvestment criteria and whose senior notes have been downgraded have been unable to reinvest," the agency said. "The ability of CLO managers to invest in high-yield bonds may keep one funding channel open to leveraged corporates, but the end of reinvestment periods signals a contraction in the availability of cheap credit for these borrowers compared with before the crisis."

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