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July 13 (Bloomberg) -- Goldman Sachs Group Inc. raised a collateralized loan obligation to be managed by PineBridge Investments that was upsized to $403.75 million from $301.5 million.
The fund, Galaxy XI, will pay lenders 129 basis points more than the London interbank offered rate for a $256 million slice rated AAA by Standard & Poor’s, according to three people with knowledge of the deal. PineBridge is the former investment management arm of American International Group Inc.
Demand for CLOs, a type of collateralized debt obligation that pool high-yield, high-risk loans and slice them into securities of varying risk and return, has picked up as investors wager that companies with speculative-grade loans can withstand a slowing economic recovery and maintain access to credit markets. Issuance has increased to $6.2 billion in the U.S. this year, compared with $3.4 billion for all of 2010, according to data compiled by Bloomberg.
“While there are risks with softening U.S. growth indicators, refinancing and default risks in loans are low,” JPMorgan Chase & Co. analysts led by Rishad Ahluwalia wrote in a July 8 report. “CLO debt principal repayment is rock-solid down” to the securities ranked BBB and BB by S&P, they wrote.
Michael DuVally, a Goldman Sachs spokesman, declined to comment. Stephanie Linehan, a spokeswoman for PineBridge, didn’t immediately return a telephone call seeking comment.
PineBridge was sold in March 2010 to Pacific Century Group, the Asia-based private investment firm. The New York-based firm oversees $80.9 billion in assets, including $5.5 billion in leveraged loans as of March 31, according to a firm presentation.
A $26 million slice of the CLO graded AA will pay 215 basis points more than the benchmark, said the people, who declined to be identified because the terms are private. A $38 million A rated piece has a coupon of 275 basis points more than Libor and a $20 million BBB slice has a coupon of 365 basis points more than the benchmark, the people said. Libor is the rate banks charge to lend to each other.
The fund also includes a $14.4 million BB slice, a $13.6 million piece of Class F notes and $35.75 million of subordinated notes, the people said.
The Standard & Poor’s/LSTA U.S. Leveraged Loan 100 Index, which tracks the 100 largest dollar-denominated first-lien leveraged loans, has risen to 94.72 cents on the dollar. The measure has dropped from 96.48 cents in February as the U.S. unemployment rate rose to 9.2 percent and Europe’s debt crisis roiled credit markets.
Leveraged loans are rated below Baa3 by Moody’s Investors Service and lower than BBB- by S&P.
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