Highland Sees Strong Demand For Pro Rata CLO

Highland Capital Management benefited from strong demand for its $550 million Bristol Bay pro rata collateralized loan obligation, with tighter pricing on the liabilities than anticipated, according to a source.

  • 17 Feb 2004
Email a colleague
Request a PDF

Highland Capital Management benefited from strong demand for its $550 million Bristol Bay pro rata collateralized loan obligation, with tighter pricing on the liabilities than anticipated, according to a source. The notes were underwritten by Citibank, which has pioneered the structure that enables loan managers to invest in pro rata loans. The source said price talk on the $39 million junior triple-A tranche was LIBOR plus 75-80 basis points, but the tranche priced at 75 basis points over LIBOR after being well oversubscribed. Citibank retains the $389 million super-senior tranche that is only partially funded reducing the costs for Highland. The double-A tranche priced at LIBOR plus 100 and the single-A at LIBOR plus 175 basis points. Highland officials declined comment and a Citi spokeswoman did not return calls.

Bristol Bay is the third pro rata CDO from Citibank. TCW completed the first (LMW 2/3/03) and PIMCO recently raised Silver Creek (10/5). Prior to these vehicles, pro rata loans were not considered suitable investments for CLOs. The spread on unfunded revolvers is too small to cover the costs of issuing liabilities in a normal cash flow CDO But the hybrid cash/synthetic arbitrage CDO gets around the problem of investing in revolvers and term loans by reducing the cost of capital to the CDO. "The revolvers can be funded more efficiently," said the source.

The Highland CLO is identical to the other Citibank deals, said the source, who noted that the investors are typically CDO-squared type investors.

  • 17 Feb 2004

GlobalCapital European securitization league table

Rank Lead Manager/Arranger Total Volume $m No. of Deals Share % by Volume
1 Bank of America Merrill Lynch (BAML) 6,665 23 12.97
2 Citi 5,781 17 11.25
3 BNP Paribas 3,715 15 7.23
4 Barclays 2,853 9 5.55
5 Credit Suisse 2,783 8 5.42

Bookrunners of Global Structured Finance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 99,250.27 279 13.11%
2 Bank of America Merrill Lynch 92,153.61 267 12.17%
3 Wells Fargo Securities 72,661.39 222 9.59%
4 JPMorgan 52,367.24 169 6.91%
5 Credit Suisse 41,885.89 127 5.53%