Experienced CLO managers Park Avenue and KKR each price new notes on Wednesday

Chicago, Sept. 25 – Wednesday traffic picked up after a slow Tuesday in the collateralized loan obligation primary market.

KKR Financial Advisors II, a wholly owned subsidiary of KKR Credit Advisors (US) LLC, priced a new $450 million portfolio to be issued by KKR CLO 27 Ltd.

And, Park Avenue Institutional Advisers LLC, a subsidiary of Guardian Life Insurance Co. of America, priced a new $399.65 million broadly syndicated CLO coming from Park Avenue Institutional Advisers CLO Ltd. 2019-2/Park Avenue Institutional Advisers CLO LLC 2019-2.

Away from the primary, secondary action was slow on Tuesday when only about $100 million changed hands in the CBO/CDO/CLO market.

In the investment-grade sector $74.81 million was traded for an average price of 99.2.

The average price was lower than Monday when it was 99.5, compared with 99.3 on Friday and 99.2 on Thursday.

Volume was still low on Tuesday in the low-grade market, but managed to reach $25.95 million. The average trading price was 86.8.

Volume was so low on Monday it did not register.

KKR brings $450 million

The KKR transaction priced in six parts and then had a class of subordinated notes.

The B-1 notes are notably exchangeable into Mascot (modifiable and splittable/combinable tranche) notes.

The minimum weighted average spread on the portfolio is 3.3%, according to Fitch Ratings.

Comparatively, this is lower than KKR’s recent KKR CLO 26 transaction which had a minimum weighted average spread of 3.35%.

The general average weighted average spread year to date is 3.42% for Fitch-rated CLOs.

A maximum of 60% of the notes can be covenant-lite, the same as the KKR CLO 26 portfolio.

The transaction documents do include Libor fallback language.

Park Avenue sells $399.65 million

In Park Avenue’s second transaction of 2019, the portfolio manager priced five classes of notes plus a subordinated class.

The CLO brings the firm’s assets under management to $1.93 billion.

As of the presale report, the portfolio is 86.9% ramped.

The weighted average spread on the transaction is 3.33%. This is lower than S&P Global Ratings’ 3.53% three-month average.

The weighted average cost of debt for the Park Avenue CLO is 1.95% versus a three-month average of 1.9%.

The collateral manager, according to S&P, has an average overlap in collateral composition of 77.9% when analyzing past CLO 2.0 transactions, higher than the average of 57.5% for all CLO 2.0 transactions rated by S&P.

The industry concentration of Park Avenue CLOs favors health care providers and services.

And, the average portfolio turnover rate of 23.53% over the past 12 months is just slightly higher than the rest of the industry.

The collateral manager currently manages four CLOs.

© 2015 Prospect News.
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