Denali Capital is in the market again this year, ramping up its second collateralized loan obligation including middle market credits. Market players said the fund is planning to pull off a summer execution of a $400 million deal for which it has been warehousing assets since March. The deal is supposed to include a sizeable basket of middle market loans, but an exact amount could not be determined. Officials at the fund declined to comment.
The liabilities to support the deal are expected to hit the market mid-summer and if current funding levels remain the same, pricing on the triple-A liabilities backing the deal are supposed to come in at LIBOR plus 44 or 45 basis points, according to dealers. In an unusual twist, the manager used middle market credits to fill out a portion of the collateral base of the deal it marketed last October, completing the ramp up in early March (LMW, 10/28).
Another manager noted that using middle market credits is risky in the sense that liquidity for the names is limited, but he explained there is opportunity in the middle market because credits are not as broadly syndicated and therefore getting allocations can be somewhat less difficult. In addition, some argue that pricing can be a little richer on deals. Market players expect the deal to close by the end of this summer.