Carlyle sells €350 million; Sankaty, Oaktree plan CLOs; $16 billion of deals in pipeline

By Cristal Cody

Tupelo, Miss., June 7 - Carlyle Group LP upsized its European collateralized loan obligation over the first week of June, despite market concerns with the European Banking Association's 5% risk retention requirement proposal, according to sources.

The association released a paper in late May that revises the CLO risk-retention requirement rule to require the CLO manager to satisfy Article 122a instead of a third-party equity investor. The new rule is expected to take effect on Jan. 1.

"The new requirement will put a dent on the new-issue CLO market, as only managers with 'deep-pockets' - such as those backed by private equity firms - could afford to retain the required equity position," Credit Suisse Securities (USA) LLC analysts said in a note.

"In addition, the current version didn't mention grandfathering existing newly issued European CLOs, which means it is very likely that these deals could be assessed for their compliancy on Jan. 1, 2014, and most likely they will fail."

If not grandfathered, the liquidity of existing newly issued European CLOs also could suffer in the secondary market, the analysts said.

European CLO spreads are trading at Libor plus 125 bps in the AAA-rated tranches, while BBB notes were seen over the week at the Libor plus 600 bps area, a market source said.

"As for euro CLO secondary spreads, we believe that senior tranches will continue to tighten, as deals approach conclusion," Dave Preston, senior analyst at Wells Fargo Securities, LLC, said in a note. "We believe that the higher-yielding mezzanine tranches provide value in some cases."

The U.S. CLO pipeline remains healthy with about $16 billion in 36 deals in the pipeline, a market source said on Friday.

Sankaty Advisors LLC firmed details for a $516.75 million offering of notes due 2025, according to market sources.

CLO manager Oaktree Capital Management LP also plans a $655.18 million CLO offering.

Anchorage Capital Group, LLC's $412 million CLO remains on tap for early June, a source said.

Anchorage Capital CLO 2013-1, Ltd./ Anchorage Capital CLO 2013-1, LLC plans to sell $236 million of class A-1 notes (//AAA); $57.7 million of class A-2 notes; $20.8 million of class B notes; $14.3 million of class C notes; $7.9 million of class D notes; $6 million of class E notes and $36 million of subordinated notes.

J.P. Morgan Securities, LLC is the placement agent.

The cash-flow CLO will be managed by New York-based Anchorage Capital Group.

Proceeds from the deal will be used to purchase a leveraged loan portfolio.

Carlyle upsizes

Carlyle Group upsized its offering to €350 million of notes due July 2025 from €300 million in its first offering in Europe since 2008, according to informed sources on Friday.

Carlyle Global Market Strategies Euro CLO 2013-1 BV was expected to sell €180 million of the class A floating-rate notes (/AAA/) talked at six-month Euribor plus 180 basis points; €33 million of class B fixed-rate notes (/AA/) talked with a 2.9% coupon; €17 million of class C fixed-rate notes (/A/) talked with a 4% coupon; €13 million of class D floating-rate notes (/BBB/) talked at six-month Euribor plus 400 bps; €21 million of class E floating-rate notes (/BB/) talked at six-month Euribor plus 575 bps; and $36 million of subordinated notes.

Final pricing terms were not immediately available.

The cash-flow CLO is backed by a revolving pool of broadly syndicated senior secured loans and bonds.

Barclays Bank plc arranged the transaction.

CELF Advisors LLP, which independently advises Carlyle's European structured credit funds, is the CLO manager.

Sankaty to price

Sankaty Advisors plans to price $516.75 million in the Avery Point II CLO Ltd.

The deal includes $304 million of class A notes (//AAA), $46 million of class B-1 notes; $25 million of class B-2 notes; $36 million of class C notes; $26 million of class D notes; $24 million of class E notes; $13.5 million of class F notes and $42.25 million of subordinated notes.

BofA Merrill Lynch is the underwriter.

Boston-based Sankaty Advisors, the credit investment unit of Bain Capital LLC, is the CLO manager.

The CLO will have a two-year non-call period and a four-year reinvestment period.

Proceeds will be used to purchase a portfolio of about $500 million of primarily leveraged loans.

Oaktree's $655.18 million CLO

Oaktree Enhanced Income Funding Series III Ltd./Oaktree Enhanced Income Funding Series III LLC will sell $402.5 million of class A notes (/AAA/), $64.5 million of class B notes (/AA/) and $188.18 million of income notes, according to a market source.

Wells Fargo Securities LLC is the lead placement agent. GreensLedge Capital Markets LLC is the co-lead placement agent.

The notes due July 20, 2023 have a non-call period and a reinvestment period that ends on Aug. 20, 2015.

The transaction is backed by a revolving pool of broadly syndicated senior secured loans.

The deal is expected to close on June 27.

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