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NEW YORK, June 6 (Reuters) - 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 assets.
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 management.
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.