Ares Management, the L.A.-based investment shop that specializes in leveraged finance, is raising a new $650 million collateralized loan obligation called Ares Enhanced Loan Investment Strategy. The latest fund stands out as it has a significant 20% equity component and will only be 30-40% ramped up at closing next month, said a CDO analyst.
Ares has structured the deal with the large equity component, which is two to three times the size of a usual equity piece, as the deal is for a single-investor and is more of a managed account, said a source. He added that the transaction is still using leverage but the investor wanted the risk/return profile to be less volatile. This single-account strategy is becoming more common as investors become more sophisticated, he said. The deal will also have a sizable-delayed draw tranche in the structure, the analyst said, pointing to the $422.5 million A-1 tranche that only has to be fully funded when the deal ramps-up. This allows Ares to close and ramp-up the transaction and avoid negative carry. An Ares spokesman did not return calls for comment.
Ares has been involved in leveraged loan management since 1997, and now manages eight CLOs and has approximately $5 billion in assets under management. The co-portfolio managers for leveraged loans are Seth Brufsky and David Sachs. The firm has significantly expanded in the past year and is also warehousing assets for a leveraged managed account. Last month, it became only the second private-equity firm to raise a business development corporation through an initial public offering (LMW, 11/11).
