Guggenheim Investment Management has closed on a new $300 million leveraged loan fund that is approximately half ramped up. Notes for the vehicle, called Loan Funding Corp. 2003-1, were priced two weeks ago, said a source. He noted that the fund has a six-month ramp-up period and will target single and double-B names. The fund issued $25 million of class A notes and $12 million of class B notes, rated BBB and BB respectively, according to Fitch Ratings. Pricing on the notes could not be determined.
Half of the proceeds from the notes will be deposited in a swap collateral account held at TD Bank for the benefit of TD Global Finance, which will act as the swap counterparty. The other half of the proceeds will be invested in liquid, senior bank notes rated at least AA with a maturity of no longer than four years. The issuer pledges all the collateral to enter into a total return swap program consisting of a series of total return swap transactions with TD Global Finance that reference the leveraged loans. The source said there is a $4 million equity piece and the deal is approximately 7.5 times leveraged. Officials at Guggenheim declined comment and bankers at TD did not return calls.
The source said the reasons an asset management firm would use a synthetic deal instead of a cash-flow CLO are speed of execution and the cost of funding. Cigna Investments closed on a $350 million fund with TD in May that uses the same structure (LMW, 5/11). Guggenheim is run by a triumvirate of ex- J.H. Whitney & Co. loan pros using funds from the Guggenheims and other families. Todd Boehly, Steve Sautel and Adrian Duffy, managing directors for the investment shop, left J.H. Whitney last year. Their first vehicle with the firm is called Guggenheim 1888 (9/02). The $448 million deal was led by Wachovia Securities and uses the APEX structure.