Sankaty prices $514.16 million CLO, spreads ease from summer deal; AAA notes remain wide

By Cristal Cody

Tupelo, Miss., Nov. 13 - Sankaty Advisors LLC priced a $514.16 million collateralized loan obligation deal with wider spreads than its first offering of the year but in line with recent primary issuance, according to market sources.

Spreads have eased over the year, especially in the AAA slice, sources said.

"In CLOs, while the lower credit quality parts of the capital structure have tightened significantly, AAAs remain wide from their YTD tights," Morgan Stanley & Co. LLC analysts said in a note. "The credit curve flattening in CLOs is led by lower rated tranches rather than the senior tranches, mainly due to a limited investor base in CLO AAAs."

Sankaty priced the Avery Point III CLO Ltd./Avery Point III CLO Corp. offering with spreads that ranged from Libor plus 100 basis points to Libor plus 140 bps for the AAA slices to Libor plus 500 bps for the BB tranche.

In the firm's $516.75 million Avery Point II CLO Ltd./Avery Point II CLO Corp. deal that closed in June, the AAA slice priced with a spread of Libor plus 111 bps, while the BB tranche priced at Libor plus 425 bps, according to a market source.

Sankaty sells $514.16 million

Sankaty Advisors sold $514.16 million of notes due Jan. 18, 2025 in the CLO via Credit Suisse Securities (USA) LLC, according to market sources.

Avery Point III CLO priced $3.5 million of class X senior secured floating-rate notes (Aaa/AAA/) with a spread of Libor plus 100 bps; $317.75 million of class A senior secured floating-rate notes (Aaa/AAA/) at Libor plus 140 bps; $27.5 million of class B-1 senior secured floating-rate notes (Aa2/AA/) at Libor plus 180 bps; $19.5 million of 4.007% class B-2 senior secured fixed-rate notes (/AA/); $52 million of class C senior deferrable floating-rate notes (/A-/) at Libor plus 325 bps; $21.5 million of class D senior deferrable floating-rate notes (/BBB/) at Libor plus 370 bps; $22.75 million of class E senior deferrable floating-rate notes (/BB/) at Libor plus 500 bps and $50.1 million of subordinated notes.

The CLO has a non-call period that ends Jan. 18, 2016 and a reinvestment period that ends Jan. 18, 2018.

The deal is backed by broadly syndicated senior secured corporate loans.

Boston-based Sankaty Advisors, the credit investment unit of Bain Capital LLC, will manage the CLO.

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