Babson prices fourth CLO

Babson Capital Europe has announced pricing for Duchess IV, its fourth collateralised loan obligation (CLO) fund. The €525m fund invests in leveraged loan assets with a target mix of 85% senior secured loans and 15% mezzanine loans.

Duchess IV is Babson Capital Europe’s second fund raised under the ownership of Babson Capital Management LLC, a member of the MassMutual Financial Group. Duke Street Capital sold Duke Street Capital Debt Management to David L Babson earlier this year. The fund was increased in size from €400m to €525m due to robust underlying deal flow. Babson Capital Europe now manages over €2.7bn of leveraged loan assets across its four Duchess CLOs and one managed account.

At its closing, in mid-May, the fund will be between 65% and 70% invested. It is anticipated that the fund will be fully invested within the next six months.

The Duchess IV notes priced as follows:

€282,000,000 Class A-1 First Priority Senior Secured Floating Rate Notes due 2020

Rated Aaa/AAA by Moodys/S&P. Expected average life of 9.5 years.

3 month EURIBOR + 24bps.

€75,000,000 Class A-2 First Priority Senior Secured Floating Rate Revolving Loan Facility due 2020

Rated Aaa/AAA by Moodys/S&P. Expected average life 9.5 years.

3 month EURIBOR + 24bps.

€38,000,000 Class B Second Priority Deferrable Secured Floating Rate Notes due 2020

Rated Aa2/AA by Moodys/S&P. Expected average life 10.1 years.

3 month EURIBOR + 36bps.

€30,100,000 Class C Third Priority Deferrable Secured Floating Rate Notes due 2020.

Rated A2/A by Moodys/S&P. Expected average life 10.1 years.

3 month EURIBOR + 60bps.

€32,800,000 Class D Fourth Priority Deferrable Secured Floating Rate Notes due 2020.

Rated Baa3/BBB- by Moodys/S&P. Expected average life 10.1 years.

3 month EURIBOR + 150bps.

€14,600,000 Class E Fifth Priority Deferrable Secured Floating Rate Notes due 2020.

Rated BB by S&P. Expected average life 8.0 years.

3 month EURIBOR + 475bps.

€52,500,000 Class F Secured Income Notes due 2020.

Unrated.

Babson Capital Europe has access to a wider investment pool than many European CLOs as a result of a portfolio hedge which enables it to efficiently invest in both sterling and euro denominated assets.

Babson Capital successfully closed Duchess III last August at €450m. The fund was the first raised by the former Duke Street Capital Debt Management (DSCDM) team under the ownership of Babson Capital Management. Duke Street Capital sold DSCDM to David L Babson in early 2004.

Ian Hazelton, chief executive of Babson Capital Europe, said:

“We are very pleased with the execution of Duchess IV. This is a great endorsement from our investor base and reflects the strong performance of the existing funds and the track-record and stability of the team. We experienced unusually strong demand during the roadshow, and as our deal-flow continues to be robust and allows us to be selective on credit, we felt comfortable upsizing the fund.”

Duchess IV was arranged and structured by Citigroup Global Markets, which worked alongside the Babson Capital Europe team during the marketing of the notes.