Babson Capital, American Capital Float New CLOs

Babson Capital Management LLC announced that it had bundled $400 million in assets, primarily corporate senior secured loans with a small amount of second-lien loans and high-yield bonds, to form Babson CLO Ltd 2012-II. The firm had closed a $350 million CLO earlier this year.

Separately, American Capital Ltd said it had closed a $362 million CLO, primarily broadly syndicated senior secured commercial loans purchased in the market. Both CLOs were partially invested in loans and bonds used to finance buyouts.

Forecasters are predicting CLO issuance to reach $32 billion this year; this may be an easy target as CLO issuance has totaled more than $25 billion year-to-date, more than the past three years combined, according to sister service Thomson Reuters Loan Pricing Corp., which tracks the credit market.

“It feels like a great time to be buying loans,” Adrienne Butler, a managing director at Babson Capital, told Buyouts. “I think the loan asset class has performed exceptionally well from the downturn up till now.”

Overall, Babson Capital manages 53 collateralized vehicles, including CLOs and collateralized debt obligations, representing $17.9 billion in asset under management as of June 30, the firm said. Babson Capital, a unit of Massachusetts Mutual Life Insurance Co., has $140 billion under management, including real estate; fixed income, tradable securities; high yield bonds and broadly syndicated leveraged loans; and a global private finance group.

American Capital, based in Bethesda, Md., says it manages $17 billion of assets, including assets on its balance sheet and assets under management by affiliates, with $100 billion of total assets under management, including levered assets. Publicly traded American Capital invests in buyouts, corporate credit instruments and real estate in North America and Europe.

“The CLO continues a long history by American Capital and its affiliates of issuances and investments in CLOs,” said Mark Pelletier, the managing director of American Capital’s CDO and CLO Group, in the press release announcing the new vehicle.

Notwithstanding the improvements in the CLO market this year, loan market professionals feel this year is generating only mixed results, Thomson Reuters LPC reported, citing a a survey conducted among members of the Loan Syndications and Trading Association, a trade association for the corporate loan market. The survey found that loan market professionals expect stronger market conditions next year, when CLO issuance is expected to total $36 billion.