Leveraged loan CLOs remain in vogue and investors recently had two similarly sized and structured deals to select from – the €357m RMF Euro CDO III from RMF Investment Management, through BNP Paribas, and the €300m Silver Birch CLO I, managed and arranged by WestLB.
For WestLB’s first venture into this asset class, a portfolio with at least 85% senior loans was used with just over a third coming from the UK and just under a third from Germany. The average rating on the portfolio was a typical B+.
Initial spread guidance for Silver Birch had Triple A notes talked at plus 26bp–28bp, Double As at plus low to mid-40s, Single As at plus mid-70s and Triple Bs at plus 175bp. The €205.5m of Triple A notes finished up with a coupon of six-month Euribor plus 27bp, with €18m of Double As at plus 45bp. Single A notes sized at €21m went at plus 75bp and €18m of Triple Bs at plus 180bp. The €7.5m of Double B notes had a coupon of plus 550bp.
Subscription levels ended up pretty similar across all tranches, at about 1.3 times, with investors coming into the lower rated tranches towards the end of the marketing period. Coming just 1bp outside the recent Harbourmaster 5 transaction and 2bp outside Avoca CLO III, plus 27bp looks like a good result for a first-time manager.
RMF’s third CLO also had an average B+ rating and the manager can invest in both fixed and floating-rate obligations, with fixed-rate notes capped at 20%. Guidance on the Triple A tranche was the Euribor plus 26bp area, Double As at the plus 40bp area and Single A notes at the plus 65bp area. Triple Bs were heard at plus 165bp–170bp and Double Bs at plus 475bp–500bp.
RMF’s track record looks to have secured tighter pricing all the way down the structure, as Triple As had a coupon of six-month Euribor plus 25bp for the 8.9-year WAL. Double As priced at plus 40bp, Single As at plus 65bp and Triple Bs at plus 170bp. The Double B tranche had a coupon of plus 485bp.