WhiteHorse VII preps deal; new issue prices fall in August; secondary CLO market quiet

By Cristal Cody

Tupelo, Miss., Sept. 9 - The September collateralized loan obligation deal pipeline is picking up as H.I.G. WhiteHorse Capital, LLC prepares to bring the $411.9 million WhiteHorse VII Ltd./WhiteHorse VII LLC transaction, according to market sources.

The CLO is expected to price the $238.8 million AAA-rated tranche at Libor plus 140 basis points.

August saw a healthy pipeline with $6.4 billion in 13 U.S. CLOs priced and €722 million sold in two European CLO transactions, according to Morgan Stanley & Co. LLC.

The issuance nearly doubled that of the $3.4 billion of CLOs priced in July and the $3.3 billion sold in June.

Global CLO new issuance volume now totals more than $57 billion, which includes 12 European CLOs.

Market sources report about $15 billion in new U.S. CLO transactions in the pipeline.

"We remain constructive on our projection of $60-$70 billion U.S. CLO new issues in 2013, and raise our projection for 2013 EUR CLO new issue volume to €6-8 billion," Morgan Stanley's Vishwanath Tirupattur said in a note. "On the other hand, secondary trading volume was light on both U.S. and EUR sides, which led to scarce observable secondary pricing information."

New issue CLO prices fell in August, with AA-rated notes down 0.15 of a point; A-rated tranches down 0.2 of a point; BBB-rated notes down 0.25 of a point and BB-rated notes down 0.12 of a point, he said.

European CLO "prices remained largely static in August, partially due to light secondary trading volume," Tirupattur said.

In the secondary market, AAA-rated spreads are quoted in the Libor plus 120 bps area, while AA-rated tranches are trading at Libor plus 210 bps.

Further down the capital structure, BB-rated notes were quoted at Libor plus 560 bps.

Secondary CLO market volume, according to Trace data, "continued to drop in August for investment-grade and below investment-grade CLO securities," Tirupattur said. "Public BWIC volume was also light in August, with $1.3 billion on the U.S. side and €17 million on the EUR side."

WhiteHorse VII in market

WhiteHorse VII will sell seven tranches of notes due Sept. 15, 2025 in the CLO offering via RBS Securities Inc., sources said.

The deal includes $238.8 million of class A-1L floating-rate notes (/AAA/AAA); $52.4 million of class A-2L floating-rate notes (/AA/); $31.2 million of class A-3L deferrable floating-rate notes (/A/); $20 million of class B-1L deferrable floating-rate notes (/BBB/); $20.8 million of class B-2L deferrable floating-rate notes; $8.8 million of class B-3L deferrable floating-rate notes (/B/) and $39.9 million of subordinated notes.

The equity tranche in the transaction was upsized from initial estimates of $38.82 million.

H.I.G. WhiteHorse Capital will manage the CLO, which is backed by broadly syndicated senior secured corporate loans.

Proceeds will be used to purchase a portfolio of about $400 million of primarily leveraged loans.

The CLO manager is the credit affiliate of H.I.G. Capital, LLC.

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