Telos taps market; pipeline busy; U.S. CLOs buy more corporates than European CLOs

By Cristal Cody

Tupelo, Miss., April 14 - Telos Asset Management LLC joined the list of CLO managers to price in 2014 with a $412.35 million collateralized loan obligation transaction, according to an informed source on Monday.

Telos Asset Management brought $252 million of AAA-rated notes at Libor plus 155 basis points at the top of the capital structure.

The firm reported in October that it planned a new CLO deal and had entered into a $140 million credit facility.

CLO primary issuance remains strong with the second quarter expected to see steady offerings, a market source said.

More than $17 billion of CLO deals are in the U.S. and European pipelines, the source said.

In Europe, "leverage has grown, and the market has become more of an issuer's market," Moody's Investors Service said in a report on Monday following a roundtable discussion with European CLO managers and investors in London.

"Underwriting standards have weakened," according to the report. "Some participants estimated that CLOs in Europe are buying around 30% of corporate issuance, where in the U.S. it is closer to 50%."

Telos prices CLO

Telos Asset Management sold $412.35 million of notes due April 17, 2025 in the Telos CLO 2014-5, Ltd./Telos CLO 2014-5 LLC transaction, according to an informed source.

The CLO priced $252 million of class A senior secured floating-rate notes (Aaa/AAA/) at Libor plus 155 bps; $39 million of 4.448% class B-1 senior secured fixed-rate notes (/AA/); $7.5 million of class B-2 senior secured floating-rate notes (/AA/) at Libor plus 215 bps; $32.75 million of class C mezzanine secured deferrable floating-rate notes (/A/) at Libor plus 300 bps; $19.75 million of class D mezzanine secured deferrable floating-rate notes (/BBB/) at Libor plus 365 bps; $18 million of class E mezzanine secured deferrable floating-rate notes (/BB/) at Libor plus 500 bps and $7.75 million of class F mezzanine secured deferrable floating-rate notes (/B/) at Libor plus 550 bps.

The CLO also brought $35.6 million of subordinated notes in the equity tranche.

BNP Paribas Securities Corp. was the placement agent.

Telos Asset Management will manage the CLO, which is collateralized primarily by broadly syndicated first-lien senior secured corporate loans and eligible investments.

The firm, a subsidiary of New York-based Tiptree Financial Inc., was in the primary market in 2013 with the $365.3 million Telos CLO 2013-4, Ltd. deal and the $361.4 million Telos CLO 2013-3, Ltd. offering.

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