Tricadia Capital is getting ready to price its first collateralized loan obligation, Telos CLO 2006-I, a $410.5 million portfolio. A firm official said it is targeting to do two CLOs per year of a similar size, noting this marks a shift for the New York manager that got its start more than three years ago with an ABS CDO platform.
According to Securitization News, a CIN sister publication, the Telos CLO is backed by 65% middle-market and 35% broadly syndicated loans. Of the collateral, 85% is senior loans while up to 15% are second liens. The manager chose to go with mostly middle-market loans as they have historically had better recovery rates than their broadly syndicated counterparts while offering wider spreads. The official noted Tricadia already invests in middle-market loans through its credit strategy hedge fund and total return swaps.
The deal also has a 5% bucket for other CLOs and the capability to be up to 20% synthetic, although to date the collateral has been all cash, the official said. The manager has committed to retaining 20% of the equity because of the attractive return profile, as well as to demonstrate to investors it has skin in the game, he added. RBS Greenwich Capital Markets is underwriting the deal.
Tricadia will be looking to hire as it grows its CLO platform, the official said, but declined further comment.