Sound Point prices $515.6 million in CLO XXIV; HPS refinances CLO, ready for post-Libor

Chicago, Aug. 27 – Sound Point Capital Management LP brought a new $505.6 million five-class issue into the collateralized loan obligation market on Tuesday.

And, HPS Investment Partners, LLC refinanced a 2016 CLO, with indenture language ready for a post-Libor era.

The secondary market was slower on Tuesday, compared with Monday, especially in the non-investment-grade sector.

Investment-grade trading amounted to $149.81 million, while volume for non-investment-grade trading ran to $11.37 million.

The average price for investment-grade trades was 98.6, based on 56 trades.

The average price for non-investment-grade trades was 95.4, and that number was based on six trades.

For both grades, customers bought more than they sold.

Sound Point prices

In its 24th CLO offering, Sound Point sold $505.6 million of new notes.

In its rating of the portfolio, Moody’s Investors Service cited the remote likelihood of an over-collateralization-based event of default as one of its strengths. “The portfolio’s event of default par ratio trigger of 102.5% is well below the initial [over-collateralization] level of 163.9%,” Moody’s said.

Noteworthy in the report, Moody’s also said that the CLO allows the “issuer to issue one or more new classes of subordinate notes that could make the interest diversion test less effective.”

During the reinvestment period, new notes can be issued which would be subordinate to the existing secured notes.

The payment waterfall could change, but it is unlikely that the issuer would issue additional notes which would have interest payments senior to the interest diversion test and change the test.

HPS refinances

Recently, on Aug. 6, HPS Investment Partners priced $507.35 million of new notes.

In that CLO offering, the issuer was among the first of CLO managers to adopt new Libor fallback language in its covenants.

Similarly, in HPS’ refinancing of its 2016 CLO, a substantial portion of the changes to the indenture involved the inclusion of Libor fallback language.

An additional change was that the B-1 notes and the B-2 notes from the additional issue were combined into one class, a new B-R class.

The original B-1 class had a floating rate of Libor plus 260 basis points and the initial B-2 class had a fixed rate of 4.68%. Folded together, they were refinanced at Libor plus 240 bps.

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