CLO primary market stays quiet; Prudential refinances $304.85 million Dryden XXII CLO

By Cristal Cody

Tupelo, Miss., Jan. 22 - Primary activity in the collateralized loan obligation market stayed quiet on Wednesday with a number of CLO managers out at industry events, sources said.

Several deals remain in the pipeline, including Redan Park Asset Management LLC's $300 million offering and Feingold O'Keefe Capital, LLC's $400 million transaction, according to informed sources.

LCM Asset Management LLC also has a CLO deal in the works.

In other activity, Prudential Investment Management, Inc. refinanced the $304.85 million Dryden XXII Senior Loan Fund/Dryden XXII Senior Loan Fund Corp. vehicle in the year's first CLO refinancing deal, according to the firm and market sources.

Prudential refinanced the coupon on the AAA tranche to Libor plus 117 basis points from Libor plus 153 bps.

"The result of the Dryden XXII refinancing was the lowering of its weighted average cost of liabilities from L+217 bps to L+170 bps, which translates into an additional 47 bps of excess spread available to the equity investors," according to a Wells Fargo Securities, LLC report.

"No other significant changes were made to the deal, including any changes to the end of reinvestment period," the report said. "Unlike the CLOs refinanced in early 2013, the Dryden XXII deal did not prematurely end its reinvestment period."

Prudential refinances Dryden

Prudential Investment Management refinanced the $304.85 million Dryden XXII CLO via RBS Securities Inc., according to the CLO manager and market sources.

All of the tranches except the BB-rated class D notes were refinanced in the CLO, which originally closed on Dec. 22, 2011.

The original offering of $195 million of class A-1 notes that priced at Libor plus 153 bps was refinanced to class A-1-R senior secured floating-rated notes (Aaa/AAA/) with a coupon of Libor plus 117 bps.

The $26.8 million tranche of class A-2-R senior secured floating-rate notes (/AA/), originally priced as class A-2 notes at Libor plus 260 bps, was refinanced to Libor plus 175 bps.

The original offerings of $17.3 million of class B-1 notes and $7 million of class B-2 notes, which priced at Libor plus 400 bps, were refinanced to $24.3 million of class B-R mezzanine secured deferrable floating-rate notes (/A/) at Libor plus 285 bps.

The CLO also refinanced the $13.6 million tranche of class C notes, priced at Libor plus 500 bps, to class C-R mezzanine secured deferrable floating-rate notes (/BBB/) at Libor plus 400 bps.

The $12 million tranche of class D mezzanine secured deferrable floating-rate notes (/BB/) was not refinanced from the original coupon of Libor plus 520 bps.

The deal also included $33.05 million of subordinated notes.

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

The notes are due Jan. 15, 2022.

Proceeds were used to redeem the original notes.

Prudential Investment Management is the primary asset management business of Newark, N.J.-based Prudential Financial, Inc.

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