KKR prices $499.2 million CLO; Sound Point, Madison reprice; mezzanine spreads soften

By Cristal Cody

Tupelo, Miss., July 22 – The broadly syndicated and middle-market CLO markets continue to remain active in July with new issuance and refinancing transactions.

KKR Financial Advisors II, LLC priced $499.2 million of notes in the CLO manager’s third new broadly syndicated CLO transaction this year.

More than $65 billion of new broadly syndicated and middle-market CLOs have priced year to date following four new deals brought to the market last week, according to a BofA research note released on Monday.

New issue AAAs are printing in the Libor plus 131 basis points to Libor plus 137 bps range, according to the report.

In refinancing activity, Sound Point Capital Management LP priced $470 million of notes in a second reprint of a 2015 broadly syndicated CLO.

Madison Capital Funding LLC also priced $302.85 million of notes in a refinancing of a vintage 2017 middle-market CLO.

Meanwhile, the CLO secondary market saw an uptick in activity last week.

BWIC volume rose about 20% on the week to just under $700 million, according to the BofA report.

“Triple-A bonds contributed the largest percentage to this week's volume and they remained overall well bid,” the note said. “Further down the stack in triple to single-Bs, bid levels looked weak especially for lower-covered and 2nd and 3rd tiered paper. At the tail end, we saw cover levels above 750 [bps] which was where we had our generic spread levels marked as of the end of December 2018.”

AAA-rated spreads were flat on the week on average at the Libor plus 115 bps area. BB-rated tranches softened 20 bps on the week to head out on Friday at the Libor plus 700 bps range.

KKR Financial prices

KKR Financial Advisors II priced $499.2 million of notes due 2032 in the new KKR CLO 26 Ltd./KKR CLO 26 LLC transaction, according to market sources.

The CLO sold $310 million of class A-1 senior secured floating-rate notes at Libor plus 132 bps and $15 million of class A-2 senior secured floating-rate notes at Libor plus 175 bps at the top of the capital structure.

Credit Suisse Securities (USA) LLC was the placement agent.

The offering is collateralized primarily by broadly syndicated first-lien senior secured corporate loans.

KKR has priced three new CLOs and refinanced one vintage CLO year to date.

The investment firm is a subsidiary of San Francisco-based KKR Credit Advisors (US) LLC.

Sound Point taps market

Sound Point Capital Management priced $470 million of notes in a second refinancing of the Sound Point CLO IX, Ltd./Sound Point CLO IX Inc., according to a market source.

The CLO sold $325 million of class A-RR senior secured floating-rate notes (expected ratings Aaa//AAA) at Libor plus 139 bps in the AAA-rated tranche.

Citigroup Global Markets Inc. was the refinancing placement agent.

The maturity on the second refinanced notes was extended to July 20, 2032 from the original and first refinanced note maturity of July 20, 2027.

In the original $515.5 million Sound Point CLO IX transaction issued July 16, 2015, the CLO priced $325 million of the class A floating-rate notes at Libor plus 152 bps.

In the first refinancing of the notes on Oct. 20, 2017, the CLO priced the AAA tranche at Libor plus 88 bps.

Sound Point Capital is a New York City-based asset management firm.

Madison Capital reprices

Madison Capital Funding priced $302.85 million of notes due April 20, 2029 in a refinancing of a vintage 2017 middle-market CLO deal, according to a market source.

MCF CLO V LLC sold $173.5 million of class A-R floating-rate notes (AAA/AAA) at Libor plus 155 bps at the top of the capital stack.

Natixis Securities Americas LLC was the refinancing placement agent for the Rule 144A and Regulation S deal.

In the original $302.85 million transaction issued March 9, 2017, the CLO priced $173.5 million of the class A floating-rate notes at Libor plus 190 bps.

The CLO is backed primarily by senior secured loans.

Madison Capital Funding is a Chicago-based middle-market finance company and subsidiary of New York Life Insurance Co.

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