American Capital CLO draws $450 mln in overall surge

American Capital CLO Fund I will invest in equity tranches of CLOs in American Capital’s portfolio, according to American Capital’s 10-Q report filed on August 10.

The fund will be comprised entirely of third-party investors and will purchase $300 million of American Capital’s existing CLO equity portfolio at its fair value as of June 30. The fund will have $150 million of investment capacity and an affiliate of American Capital will manage it for “customary management and incentive fees,” according to the filing.

The fund’s Form D lists executives John Erickson, Samuel Flax, Mark Pelletier and Malon Wilkus. The Form D shows a date of first sale of August 5, while the 10-Q filing states that a final close of CLO Fund I is expected to occur within 90 days.

American Capital did not respond to a request for comment.

American Capital has raised at least seven CLO funds to date, including one in 2007 and six more from 2012 to 2015, according to its website. It also has a portfolio of CLOs from Ares Management, Avery Point, Babson Capital, Blue Hill, Carlyle Group, Eaton Vance, LightPoint, Neuberger Berman and others.

Its most recent CLO listed on its website, American Capital CLO 2015-1, completed a $552 million securitization in May. The pool invests in broadly syndicated senior secured floating rate loans purchased in the market, according to the firm’s website.

Overall, CLO buyers have been snapping up leveraged loans ahead of anticipated rate hikes by the U.S. Federal Reserve as a way to tap into fatter returns from bigger interest payments expected down the road, according to industry observers.

A total of $70 billion in CLOs were issued in the United States as of mid-August, according to Wells Fargo, which has projected about $90 billion in issuance for the year. All told, $124 billion in CLOs were issued in 2014, the highest year on record.

Post-crisis, U.S. broadly syndicated loan CLOs have average quarterly equity distributions in the 4.6 percent to 5.7 percent range over their lifetimes. Middle-market loan CLOs generally have average quarterly lifetime equity distributions of 5 to 6.3 percent, according to Wells Fargo. These returns remain attractive in a low-yield environment.