By Kristen Haunss and Christopher DeReza
March 12 (Bloomberg) –- TPG Capital, the Fort Worth, Texas-based private-equity firm, raised its first collateralized loan obligation, according to two people with knowledge of the deal.
The $479 million TICP CLO 1 includes a $283.5 million sliced rated AAA that pays a rate of 160 basis points more than the London interbank offered rate, said one of the people, who asked not to be identified because the terms are private. Citigroup Inc. arranged the deal, the person said.
TPG joins other private-equity firms such as Apollo Global Management LLC (APO:US) and Blackstone Group LP in diversifying away from leveraged buyouts and into managing CLOs. There have been $15.7 billion of CLOs raised in the U.S. this year after $82 billion were issued in 2013, according to Royal Bank of Scotland Group Plc data. Morgan Stanley cut its 2014 forecast last month to $55 billion to $65 billion, from its initial projection of $65 billion to $75 billion.
Founded in 1992, TPG has invested in companies including Avaya Inc., Caesars Entertainment Corp. and Energy Future Holdings Corp. The firm hired Douglas Paolillo last year. He is a founding partner, portfolio manager and head of TPG Institutional Credit Partners, one of the people said. TICP is a credit manager that oversees a variety of fund types that invest in leveraged loans, high-yield bonds and structured credit. He was previously a managing director at Blackstone-owned GSO Capital Partners LP.
Owen Blicksilver, a spokesman for TPG at Owen Blicksilver Public Relations Inc., declined to comment.
Leon Black’s New York-based Apollo was the fourth-largest U.S. CLO manager by assets with $10.3 billion as of December, according to a Feb. 12 report from Moody’s Investors Service. New York-based GSO, was the fifth-largest in the U.S. with $10.2 billion under management. Dallas-based Highland Capital Management LP was the biggest manager by assets with $12 billion, according to the report.
CLOs, a type of collateralized debt obligation that pool high-yield, high-risk loans and slice them into securities of varying risk and returns, were the largest buyers of leveraged loans last year, with a 53 percent market share, according to the New York-based Loan Syndications and Trading Association.
The boom in CLOs last year mirrored a record issuance of leveraged loans. There were $352.8 billion of new leveraged loans raised last year, according to data compiled by Bloomberg.
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