KKR Financial considers new CLO; Columbia Management Investment Advisors to price offering

By Cristal Cody

Tupelo, Miss., May 1 - KKR Financial Holdings LLC said it may bring a new collateralized loan obligation, while other potential issuers expect to be in the market as soon as later in the week, according to informed sources.

Columbia Management Investment Advisors, LLC is expected to price a collateralized loan obligation of notes, according to informed sources.

"We are working a transaction right now," one source said.

As Moody's Investors Service reported in a note, the "new CLO issuance pipeline remains robust in the U.S."

KKR Financial Holdings is considering getting back into the market. Chief executive officer William Sonneborn said on Wednesday during the company's first quarter earnings conference call that KKR may bring a new CLO.

KKR Financial CLO 2012-1, Ltd., a $412 million offering that closed in December, was the firm's first deal in the broadly syndicated securitization market since 2007.

"We continued ramping CLO 2012-1 to 97% at March 31, so we actually didn't [print] a CLO in Q1," Sonneborn said. "That said, we did start to purchase assets earmarked for a potential new CLO. Since we don't have any CLOs we have to ramp by a certain date, we can be patient selecting specific assets, which is increasingly important as lower quality issuers have gained access to the market."

Sonneborn echoed market sources that report the strong demand has outstretched supply "given a relatively lengthy period of little global M&A volume."

"Demand is seemingly never been stronger; CLOs had another post-crisis quarterly issuance record of $28 billion in Q1 and retail inflows in the loan bonds regularly surpassed prior records in the back half of the quarter," he said.

The global investment firm ended the quarter with more than $700 million of cash, in addition to a $150 million revolver and mezzanine notes that Sonneborn said KKR may sell out of its CLO position.

A market source said the lack of loans is a long-term issue for the CLO market but a "wave of LBO activity" could spur extra growth.

Columbia plans deal

Columbia Management Investment Advisors' CLO offering is expected to price later in the week, according to informed sources.

Morgan Stanley & Co. LLC is the underwriter.

Columbia Management Investments Advisors last priced a CLO earlier in the year. The firm sold a $370.5 million offering through Cent CLO 17 Ltd./Cent CLO 17 Corp., an arbitrage, cash flow CLO.

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