Tight pricing for GSC CDO

Another European leveraged loan CLO has priced at tight levels, the latest being GSC European CDO II from the US manager GSC Partners. Lehman Brothers ran the marketing and sale of notes for the €400m trade, which offered a combination of floating and fixed-rate notes.

The bulk of the deal came in the senior A1 tranche sized at €266m, rated Triple A by both Moody’s and S&P, with a weighted average life of 7.1 years. Spread guidance in the market of six-month Euribor plus 26bp area was met with a plus 26bp print.

Double A notes in Class B were talked at the plus 39bp area, pricing at plus 39bp, while floating-rate Single A bonds went at plus 75bp, also in line with price talk. Single A fixed-rate notes came with a coupon of 3.965%, while Triple B floating-rate notes priced at plus 175bp. Structured note coupons in Class D2 were also offered and Class E1 floaters rated Double B went at plus 525bp, with fixed-rate E2s at 8.965%.

GSC has a growing reputation in Europe and though without the strength in the senior secured space of other managers its mezzanine business, is well regarded. This transaction featured mostly senior secured loans, with a five-year reinvestment period. The weighted average portfolio rating is B+, which is expected to ramp up over the course of the next year, with some 50% in place at closing.

Senior secured loans have to account for at least 75% of the portfolio, with a minimum of 10% mezzanine loans.

The maximum amount of mezzanine obligations or high-yield bonds is 20%, with a maximum single obligor size of €8m. There is also a 20% cap on US or Canadian obligations and a limit of 25% non-euro obligations.