Antares Capital Corp. has boosted its origination and asset management capacity with the pricing of a new $450 million CLO called Navigator CDO 2003. The deal was upsized by $50 million during the marketing phase after Antares raised more equity than anticipated for the transaction, explained Barry Shear , Antares' cfo. The equity piece was $36 million and Citibank priced the notes for the vehicle, with the triple-A notes at LIBOR plus 49 basis points. "Citibank did a terrific job," Shear said.
Several factors enabled more than enough equity to be raised in what some sources said is a difficult environment. "These assets are middle-market loans and so the deal is a little unique as a CLO asset class," Shear noted. "Combined with a good track record this attracted the equity investors," he added. Importantly, "there has been a spread tightening in the large cap loans. This is a concern for the market, but a benefit of the middle-market is the pricing has not contracted on the loans to the same degree," Shear explained. He said the target is for 60% middle-market loans and 40% broadly syndicated loans. One investor in CDOs concurred, noting that equity investors in CLOs that tap leveraged loans will have to accept lower returns if spread tightening persists.
Antares is both an originator of assets and an asset manager, which is fairly unique, Shear noted. Deals that will be within the CDO portfolio include Antares-led and co-agented deals. The last Antares CDO was Mariner CDO 2002, which also invested equally in middle-market and broadly syndicated loans. Citi also led this transaction. Prior to Mariner, the firm completed Antares Funding, a $600 million CDO that invested two-thirds in loans and one-third in bonds, and NOVA CDO 2001, which invested two-thirds in bonds and one-third in loans.