| NEW YORK, June 6
NEW YORK, June 6 Citigroup is marketing a
$511.96 million collateralized loan obligation (CLO) for GSO
Blackstone Debt Funds Management LLC, sources told
Thomson Reuters LPC.
The CLO, which is called Gramercy Park CLO, includes a
$329.3 million Aaa/AAA tranche; a $33.7 million AA tranche; a
$42.5 million A tranche; a $23.75 million BBB tranche; a $27.5
million BB tranche; and a $55.21 million equity tranche. The CLO
will have a ramp-up period of five months after its closing,
meaning it will have five months after closing to purchase loan
The reinvestment period - the length of time the CLO can
actively trade in and out of loans - is four years. The non-call
period is two years, while the final maturity is 12 years.
At least 90 percent of the CLO portfolio is to be made up of
senior secured loans, with a 10 percent cap for riskier assets
like second-lien loans, unsecured loans, senior secured bonds,
senior secured floating rate notes and unsecured bonds. The
bucket for covenant-lite loans is capped at 40 percent, while
the triple-C loan bucket is capped at 7.5 percent. There is no
provision to buy structured finance securities for the
portfolio, and fixed rate obligations are capped at 7.5 percent.
GSO Blackstone has $33.1 billion in total assets under
management across 50 existing CLOs, separate accounts,
co-mingled funds, BDCs, closed-end funds, and a structured
finance vehicle. It has $26.2 billion in CLO assets under
In 2011, GSO Blackstone issued two CLOs - a $690.17 million
deal in June, followed by a $400 million deal in August. The AAA
notes in the June and August CLOs priced at 120bp over Libor and
127bp over Libor, respectively.
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, $15.08
billion in CLOs have priced.