Shenkman brings $520.6 million Washington Mill CLO; deal pipeline climbs to $17.1 billion

By Cristal Cody

Tupelo, Miss., April 11 - New CLO issuance brought over the week includes the $520.6 million Washington Mill CLO Ltd./Washington Mill CLO LLC deal from Shenkman Capital Management, Inc., according to an informed source on Friday.

The AAA tranche priced at Libor plus 150 basis points, according to the source.

Shenkman Capital Management was in the primary market in 2013 with the $471.38 million Brookside Mill CLO Ltd./Brookside Mill CLO LLC deal and the $419.1 million Sudbury Mill CLO Ltd./Sudbury Mill CLO LLC offering.

The CLO deal pipeline climbed higher with 36 transactions totaling $17.1 billion in the works, up about $2 billion from the previous week, according to a market source on Friday.

Year to date, more than $28 billion of CLOs have priced, according to market sources.

The week ended with market participants continuing to digest the Federal Reserve's update to the Volcker Rule, sources said.

The Federal Reserve said on Monday it will give banks a two-year extension until 2017 to comply with the rule. The regulation prohibits banks from owning CLOs that hold bonds.

"The deals that have come this year are also almost all exempt because of their loan-only collateral," Barclays analysts Bradley Rogoff and Eric Gross said in a note on Friday.

Shenkman prices CLO

Shenkman Capital Management priced $520,625,000 of notes due April 20, 2026 in the Washington Mill CLO deal via BofA Merrill Lynch, according to an informed source.

The CLO sold $3.5 million of class X senior floating-rate notes (//AAA) at Libor plus 100 bps; $295 million of class A-1 senior floating-rate notes (//AAA) at Libor plus 150 bps; $18.75 million of 3.28% class A-2 senior fixed-rate notes (//AAA); $48,125,000 of class B-1 floating-rate notes at Libor plus 205 bps; $18.75 million of 4.25% class B-2 fixed-rate notes; $25,625,000 of class C floating-rate notes at Libor plus 300 bps; $33,125,000 of class D floating-rate notes at Libor plus 345 bps; $23.75 million of class E floating-rate notes at Libor plus 485 bps and $11.25 million of class F floating-rate notes at Libor plus 550 bps.

The deal included $42.75 million of subordinated notes in the equity tranche.

Shenkman Capital Management will manage the CLO, which is backed primarily by broadly syndicated senior secured loans.

The New York-based investment firm plans to use the proceeds to purchase a portfolio of about $500 million of primarily senior secured leveraged loans.

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