Deutsche Bank Said to Sell $358.2 Million Octagon Credit CLO
February 23, 2012, 1:02 PM ESTBy Kristen Haunss
(Adds CLO issuance in third paragraph.)
Feb. 22 (Bloomberg) -- Deutsche Bank AG raised a $358.2 million collateralized loan obligation for Octagon Credit Investors LLC, according to two people with knowledge of the transaction.
The CLO includes a $223 million slice rated AAA by Standard & Poor’s that pays a rate of 146 basis points more than the London interbank offered rate, said the people, who declined to be identified because the terms are private.
There has been $2.4 billion of CLOs backed by widely syndicated loans raised in the U.S. this year, according to data compiled by Bloomberg. At this time last year there was $1.2 billion of such funds raised. Royal Bank of Scotland Group Plc expects CLO issuance of $12 billion to $14 billion this year, excluding refinancings.
CLOs are a type of collateralized debt obligation that pools high-yield, high-risk loans and slices them into securities of varying risk and return.
The Octagon fund, which was increased from $307.2 million, had the tightest AAA spread on a CLO this year, according to Bloomberg data.
AAA CLO secondary spreads tightened to 210 basis points more than Libor in the U.S. on Feb. 2 after widening to 265 basis points in October, the most since December 2009, according to Morgan Stanley data. Spreads widened to as much as 725 basis points in April 2009. Libor is the rate at which banks say they can borrow in dollars from each other.
CLO Slices
CLO slices have come in as leveraged loan prices have improved. Loan prices in the U.S. have risen 2.42 cents on the dollar this year, according to the S&P/LSTA U.S. Leveraged Loan 100 Index. They advanced to a high this year of 93.55 cents on Feb. 9 and fell to 93.17 cents yesterday.
Andrew Gordon, chief executive officer at New York-based Octagon, didn’t return a telephone call seeking comment. Amanda Williams, a Deutsche Bank spokeswoman, declined to comment.
--Editors: Dennis Fitzgerald, Faris Khan
To contact the reporter on this story: Kristen Haunss in New York at khaunss@bloomberg.net
To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net
