CIT Group is readying its first collateralized loan obligation and expects to launch it this quarter. The target for the firm, subject to market conditions, is to do a couple of CLOs each year. "This is not a balance sheet transaction," said Peter Connolly, executive v.p. and head of the syndicated loan group, who is spearheading the effort.
The firm already has 20 active programs of outstanding asset-backed security securitizations--including small equipment lease securitization and home equity, among others. But this is its first step into CLOs. "When you look at what CIT's strategy has been the last 18 months, ramping up the sales force, making significant hires...this is a natural extension and good compliment [to our existing lending capabilities]," Connolly explained.
The CLO is expected to be about $500 million, predominantly middle-market credits, somewhere between 40-60%, as well as some broadly syndicated loans. It is expected to have an equity piece of 10% or less and a small carve out of about 5% for second liens. There will be no bonds. The assets will consist of loans from its balance sheet as well as those bought in the market. It is expected the portfolio will be significantly ramped at close, somewhere between 80-100%.
Wachovia Securities is the underwriter. "I think Wachovia is known to have good middle-market CLO activity," Connolly said. "They have a strong track record in leading middle-market CLOs." He declined to comment on who will make up the management team, but said it will consist of a combination of in-house employees as well as new hires.
Last spring, Connolly, along with Roger Burns, Thomas McNicholas, Terence Sullivan, Vincent DeVito, Andrew Giangrave and Patrick Flynn all joined from GE Capital to build out CIT's syndicated loan group (CIN, 4/10).
