Bain to price euro CLO; details emerge for Allegro, BlueMountain, MCF

By Rebecca Melvin

New York, Aug. 18 – Boston-based Bain Capital Credit Ltd. plans to price €362.5 million of notes due Oct. 17, 2030 in the new Bain Capital Euro CLO 2017-1 DAC, according to a market source.

Citigroup Global Markets Ltd. is arranging the financing, which is expected to close Oct. 12.

The deal is backed primarily by broadly syndicated senior secured loans and bonds, and includes

€206.5 million of class A senior secured floating-rate notes (/AAA/), €31.50 million of class B-1 senior secured floating-rate notes (/AA/), and €15 million of class B-2 senior secured floating-rate notes (/AA/) at the top of the capital structure.

Meanwhile, details emerged for three recently priced CLOs. Asset management firm AXA Investment Managers, Inc. has priced $507 million of notes due October 16, 2029 in the Allegro CLO V, Ltd./Allegro CLO V LLC offering.

The Allegro V sold $3 million of class X floating rate notes (//AAA) at Libor plus 100 basis points and $317.50 class A senior secured floating-rate notes (//AAA) at Libor plus 125 bps at the top of the stack.

It also priced four additional floating-rate tranches and a tranche of subordinated notes that were not rated.

Morgan Stanley & Co. LLC arranged the financing for which proceeds will be used to purchase a portfolio of about $500 million primarily senior secured leveraged loans.

New York-based BlueMountain Fuji Management LLC priced $561.35 million of notes due Aug. 20, 2030 in the BlueMountain Fuji CLO II Ltd./BlueMountain Fuji CLO II LLC transaction.

This CLO sold $332.75 million of class A-1A senior secured floating-rate notes (/AAA/) at Libor plus 120 basis points; $33.55 million of class A-1B senior secured floating-rate notes at Libor plus 135 bps; $51.70 million of class A-2 senior secured floating-rate notes (/AA/) at Libor plus 160 bps; $35.20 million of class B senior secured floating-rate notes (/A/) at Libor plus 215 bps; $33 million of class C senior secured deferrable floating-rate notes (/BBB-/) at Libor plus 300 bps, $19.80 million of class D senior secured floating-rate notes (/BB-/) at Libor plus 615 bps and $55.35 million of subordinated notes.

Citigroup was the initial purchaser.

And Chicago-based middle-market finance company Madison Capital Funding LLC priced $301.76 million of notes due October 2029 in its third middle-market CLO deal year to date.

MCF CLO VII LLC sold $175 million of class A floating-rate notes (//AAA) at a discount margin of Libor plus 160 basis points; $33.3 million of class B floating-rate notes at a discount margin of Libor plus 205 bps; $25.5 million of class C deferrable floating-rate notes at a discount margin of Libor plus 2756 bps; $19.5 million of class D deferrable floating-rate notes at a discount margin of Libor plus 410 bps; $12.1 million of class E deferrable floating-rate notes at a discount margin of Libor plus 675 and $38.01 million of subordinated notes.

Wells Fargo Securities, LLC was the underwriter.

Madison Capital Funding is a subsidiary of New York Life Insurance Co.

Middle-market CLO issuance strong

For the year to date, middle market CLO issuance stands at $8.3 billion from 15 deals, which is in line with full-year issuance volume for 2016, according to a note from analysts at Wells Fargo Securities published on Friday.

Middle market CLOs make up about 6.8% of total outstanding U.S. CLO volume.

Despite greater supply, middle-market CLO spreads have remained tight, reaching three-year tights for all asset classes.

AAA middle-market spreads are about 162 basis points, and are about 50 bps tighter than this time last year, according to the Wells Fargo analyst team led by David Preston.

Ten managers have issued middle market deals so far this year, compared to five at this point last year. Of the 12 managers that issued middle market CLOs in 2016, five have returned to the market this year, while two of the managers are new to the middle market CLO space in 2017.

Limited supply and increased demand has led to more leveraged middle market loan LBO structure in recent years and leverage has increased since early 2016 and is back to 2015 levels.

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