Morgan Stanley has priced the notes for GoldenTree Asset Management's latest collateralized loan obligation, GoldenTree Loan Opportunities Fund II. The deal ended up being $375 million, which is $75 million more than market talk indicated, said a banker. The vehicle is rare in the market for enabling the manager to purchase up to 30% distressed and stressed loan assets (LMW, 6/8). Also, like the mammoth $700 million GoldenTree CLO, the new fund has a revolver within the CLO. This is up to 15% of the vehicle, said a banker. GoldenTree's lead loan portfolio manager, Fred Haddad, did not return calls.
The $171 million Triple-A tranche priced at six-month LIBOR plus 55 basis points. The revolver portion has the same pricing, but only when fully funded. The facility fee is 27.5 basis points. The equity component of the deal is 11%.
According to Standard & Poor's, for par loans, management seeks a return-to-equity greater than 18%, liquidity of 85% or better, minimum issue size of $100 million, two times asset coverage, free cash flow and strong businesses with covenants. For distressed loans, the manager favors return-to-equity greater than 30%, liquidity of 80% or better and minimum issue size of $100 million, 1.5 times asset coverage and free cash flow. The credit agreement must protect against overleveraging should the business deteriorate.