| NEW YORK
NEW YORK May 23 JP Morgan outlined price
guidance on a $513.35 million collateralized loan obligation
(CLO) it is marketing for Carlyle Investment Management,
sources told Thomson Reuters LPC.
The CLO, which is called Carlyle Global Market Strategies
CLO 2012-2, includes a $323 million Aaa/AAA tranche guided in
the 133bp over Libor area on a DM basis; a $55 million AA
tranche guided in the 250bp over Libor area on a DM basis; a
$37.5 million A tranche guided in the 375bp over Libor area on a
DM basis; a $24 million BBB tranche guided in the 575bp over
Libor area on a DM basis; a $23 million BB tranche guided in the
775bp over Libor area on a DM basis; and a $50.85 million equity
A discount-to-margin, or DM, is the margin after taking into
account the discount on a CLO tranche.
The Carlyle CLO - the firm's second this year - is slightly
upsized from $512.6 million at launch in April. The CLO's
reinvestment period - the length of time it can actively trade
in and out of credits - is four years. Its non-call period is
two years and its legal final maturity is 11 years.
Initial feedback on the deal is due May 29, while pricing is
expected on June 1.
Carlyle manages roughly $16 billion of CLOs globally. Since
August 2010, Carlyle has acquired the rights to manage roughly
$5.9 billion in broadly syndicated U.S. CLOs, $1.2 billion in
middle market U.S. CLOs and 2.2 billion euros in European CLOs.
The firm's first CLO this year - a $509.88 million deal - priced
in March. The AAA notes on that deal printed at 143bp over
Last year, Carlyle raised a $500 million CLO, in which the
AAA tranche printed at 122bp over Libor.
CLOs - which package leveraged loans into different slices
of risk and sell them to investors as bonds with varying yields
- are still a substantial buyer base for loans post the credit
crisis. Sources estimate, however, that CLOs now make up around
40-50 percent of the demand for loans, down from 70-75 percent
at the height of the market.
CLOs make money based on the difference between the
liabilities spreads that they pay to their investors and the
spreads they earn on the underlying loan assets. Since the
resurgence of the CLO market in 2011, liabilities spreads on all
parts of CLOs' capital stacks have been trending lower, although
they are still wide compared to liabilities spreads on the
vintage CLOs from the bull market of 2006.
In 2011, $13.24 billion in CLOs were printed in the U.S.,
according to Thomson Reuters LPC data. So far this year, $14.56
billion in CLOs have priced.