Babson Capital has scored its tightest pricing ever on its recently closed collateralized loan obligation. The tightening can be attributed to market conditions and Babson's track record, according to Tom Finke, managing director and head of the firm's bank loan team in Charlotte, N.C.
The $575 million Babson CLO 2006-1 is Babson's first for the year and is backed by leveraged loans, with small buckets for second-lien loans and high-yield bonds. Finke noted the timing of the issuance was related to the time needed for warehousing and marketing. The triple-B tranche was priced at 150 basis points over LIBOR and the double-B tranche was priced at 375bps over. By contrast, the Babson CLO 2005-3 had a triple-B tranche priced at 170bps over and a double-B tranche priced at 450bps over.
Like previous deals, this structure has a delayed-draw note, which allows the firm to issue notes while still ramping up. The deal was upsized to $575 million from $500 million, a combination of higher-than-anticipated investor demand and Babson's comfort with a larger deal size, Finke said. The deal was underwritten by Morgan Stanley.