Jefferies eyes $409.85 million CLO; KKR boosts CLO exposure; pipeline now $14.5 billion

By Cristal Cody

Tupelo, Miss., Jan. 31 - Though 2014 issuance is off to a light start, the deal pipeline for the collateralized loan obligation market rose to $14.5 billion over the week, according to a market source on Friday.

"CLOs have had a slower start to the year because of regulatory concerns, but we still expect 2014 issuance to come up just short of the second highest total ever of $84 billion in 2013," Barclays analysts said in a note on Friday.

Jefferies Finance LLC is set to be in the primary market with a $408.95 million CLO transaction, according to an informed source on Friday.

Jefferies to sell CLO

Jefferies Finance plans to sell $408.95 million of notes due February 2025 in the CLO deal, a market source said.

JFIN CLO 2014 Ltd./JFIN CLO 2014 LLC intends to price $239.5 million of class A senior secured floating-rate notes (/AAA/); $41 million of class B senior secured floating-rate notes (/AA/); $40.5 million of class C deferrable floating-rate notes (/A/); $22 million of class D deferrable floating-rate notes (/BBB/); $18.75 million of class E deferrable floating-rate notes (/BB/); $8 million of class F deferrable floating-rate notes (/B/); and $40.1 million of subordinated notes.

BNP Paribas Securities Corp. is the lead placement agent. Jefferies LLC is the co-arranger.

Jefferies Finance will manage the CLO.

New York City-based Jefferies Finance is a commercial finance company co-owned by Jefferies Group LLC and Massachusetts Mutual Life Insurance Co.

KKR increases CLO exposure

KKR Financial Holdings LLC executives said during a fourth-quarter and fiscal 2013 earnings conference call on Friday that the company retained the entire equity tranche of its most recent CLO deal.

KKR Financial Advisors II, LLC sold $384 million of notes due Jan. 23, 2026 in the KKR Financial CLO 2013-2, Ltd./KKR Financial CLO 2013-2, LLC CLO deal on Dec. 20, which closed on Jan. 23.

"This was a $384 million deal with $45 million of sub-notes, all of which KFN retained," Craig Farr, chief executive officer of KKR Asset Management, LLC, said during the company's conference call.

During the fiscal 2013 year, KKR "really wanted to increase our capital deployment, in particular cash yielding strategies like CLOs," Farr said.

"In CLOs, we mentioned increasing our exposure by tapping three sources, KKR CLOs; third-party CLOs, the new area for us; and then Avoca CLOs," he said. "While KKR has not completed the Avoca acquisition yet, we did execute in those first two areas."

Dublin-based Avoca Capital Holdings sold the €310.75 million Avoca Capital CLO X Ltd. CLO in November. The acquisition by KKR is expected to close in the first quarter.

KKR also priced the $519.4 million KKR Financial CLO 2013-1, Ltd./KKR Financial CLO 2013-1, LLC transaction in June.

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