Five Arrows prices $302.75 million; Fortress brings CLO; pandemic impacts middle-market

By Cristal Cody

Tupelo, Miss., July 1 – The broadly syndicated and middle-market CLO spaces are seeing new primary action.

Five Arrows Managers North America LLC priced a $302.75 million broadly syndicated deal in the manager’s first offering of 2020.

Fortress Investment Group LLC sold $390 million of notes in a new static middle-market CLO.

The deal is the manager’s first transaction of the year, following two broadly syndicated CLO deals it priced in 2019.

Middle-market CLO supply has thinned amid the Covid-19 pandemic impact.

Year to date, more than $30 billion of new dollar-denominated broadly syndicated CLOs have priced, while middle-market volume totals about $3 billion, sources said.

Moody’s Investors Service said in a report on Wednesday that the credit quality of collateral backing middle-market CLOs that it rates is declining as a result of Covid-19-related economic shocks.

“The vast majority of these borrowers operate in industries that are either moderately or highly vulnerable to economic fallout from the pandemic,” Moody’s said. “This exposure exceeds that of CLOs backed by broadly syndicated loans. However, middle-market CLO structures provide several mitigants to this heightened collateral risk.”

Nearly 90% of middle-market CLO collateral is in industrials moderately or highly vulnerable to the virus, compared to the average of 67% in broadly syndicated CLO portfolios, Moody’s said.

“Given middle-market companies’ high leverage and investors' current risk aversion, meeting refinancing needs amid the pandemic will be difficult for many of these borrowers,” Moody’s notes.

Approximately $2.4 billion, or 12%, of outstanding middle-market CLO collateral matures in 2020-2021 and will need to be refinanced, compared with $12.6 billion, or 3%, of broadly syndicated CLO collateral, according to the report.

Ocean Trails CLO prints

Five Arrows Managers North America priced $302.75 million of notes due July 15, 2029 in the Ocean Trails CLO 8/Ocean Trails CLO 8 LLC transaction, according to market sources.

The CLO priced $180 million of class A-1 floating-rate notes at Libor plus 195 basis points at the top of the capital structure.

Barclays arranged the transaction.

Five Arrows Managers will manage the broadly syndicated CLO, which has a one-year non-call period and a one-year reinvestment period.

The CLO is backed primarily by senior secured loans.

Five Arrows Managers is a Los Angeles-based investment manager and subsidiary of Rothschild North America Holdings, Inc.

Fortress sells $390 million

Fortress Investment Group sold $390 million of notes due July 15, 2028 in its middle-market CLO transaction, according to market sources.

Fortress Credit Opportunities XIII CLO Ltd./Fortress Credit Opportunities XIII CLO LLC priced $220 million of class A floating-rate notes at Libor plus 225 bps in the AAA-rated tranche.

Natixis Securities America LLC and GreensLedge Capital Markets LLC were the placement agents.

Fortress Investment subsidiary FCO XIII CLO CM LLC will manage the CLO, which has a one-year non-call period.

The deal is backed primarily by middle-market senior secured corporate loans.

Fortress Investment Group is based in New York.

© 2015 Prospect News.
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