KKR Financial Advisors II plans $410 million CLO reset; refinancings to increase

By Cristal Cody

Tupelo, Miss., Feb. 15 – CLO refinancing action remains robust with more than $15 billion of vintage notes already refinanced year to date and a steady expected deal pipeline going forward, according to market sources.

KKR Financial Advisors II, LLC plans to price $410 million of notes in a refinancing and reset of a 2015 CLO.

Elsewhere, market participants continue to digest the U.S. Court of Appeals for the District of Columbia’s ruling on Friday that CLO managers will not be subject to risk retention rules. The decision provides a 45-day appeal process and will not take effect until at least April 2.

The potential for “risk retention to no longer be required for open market CLOs after April 2 may increase the already elevated number of CLOs attempting to refinance or reset around the April payment date,” Fitch Ratings said in a release on Thursday. “It remains to be seen if CLO investors share in that sentiment in terms of CLO note spreads and pricing.”

The court ruling reversed a lower court ruling against the Loan Syndications and Trading Association. Risk retention rules went into effect on Dec. 24, 2016 and require issuers to retain 5% of a CLO deal.

“Should risk retention in the U.S. no longer be applicable to open-market CLOs, it is likely that new CLO managers will find it easier to enter the CLO issuance market and we might see more small players as well as differentiation in terms of whether the CLO equity is retained with the manager or placed with third parties,” Fitch said.

KKR to refinance 2015 CLO

KKR Financial Advisors II plans to price $410 million of notes in a refinancing and reset of the vintage KKR Financial CLO 13 Ltd./KKR Financial CLO 13 LLC transaction, according to a market source.

The deal includes $256 million of class A-1-R floating-rate notes (//AAA); $47 million of class B-1-R floating-rate notes; $20 million of class C-R floating-rate notes; $24 million of class D-R floating-rate notes; $21 million of class E-R floating-rate notes; $7 million of class F-R floating-rate notes and the original $35 million of subordinated notes.

Morgan Stanley & Co. LLC is the refinancing placement agent.

KKR Financial CLO 13 originally was issued Dec. 16, 2015 as a $412 million CLO of notes due Jan. 16, 2028.

KKR is an investment firm and subsidiary of San Francisco-based KKR Credit Advisors (US) LLC.

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