Octagon brings $506.5 million CLO in seven tranches; Zais prices $400 million notes

Chicago, Aug. 26 – Two experienced firms priced new dollar-denominated CLOs on Monday.

Octagon Credit Investors, LLC brought $506.05 million to market in a deal that is expected to settle in September.

And, Zais Group, LLC priced a $400 million 12-part offering due 2032.

In the secondary market, Friday’s session included $169.54 million of investment-grade securities and $34.86 million of non-high-grade securities, lighter than Thursday’s volume.

The investment-grade securities had an average trading price of 99, in line with prices earlier in the week.

The non-high-grade average price was 54.8. The top five non-investment grade trades were listed as averaging 94.9, but the bottom five trades had an average price of 30.1. The weighted average was 62.3.

The London market was closed for the summer bank holiday on Monday, making the European market quiet for CLOs.

Octagon in seven parts

Octagon Investment Partners 43, Ltd./Octagon Investment Partners 43, LLC priced $506.05 million in a seven-part cash flow CLO.

In Moody’s Investors Service’s modeling of the transaction, some of the metrics of the deal emerged as stronger and some emerged as weaker when compared with a base case.

Particularly, the deal’s weighted average spread was significantly above average. It was in the 90th percentile at 3.79%, indicating more interest proceeds generated.

The deal’s weighted average rating factor was below average. The WARF for this CLO was in the 30th percentile at 2750.

The weighted average recovery rate was 47.02%, significantly below average when compared to US CLOs 2.0s rated by Moody’s, in the 20th percentile.

Zais Group in 12 parts

Zais Group priced its $400 million collateralized loan obligation offering in 12 parts.

The average credit quality of the portfolio is B+/B, in line with other recent CLOs, according to Fitch Ratings.

The weighted average recovery assumption for Zais’ deal is 80.3%, according to Fitch.

In the cash flow analysis, the rating agency stated that the class A-1 notes can withstand default rates up to 69.6%, assuming recoveries of 38.2%.

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