GoldenTree Financial is in the market ramping up one of the largest collateralized loan obligations the market has seen in the last six months as assets remain sparse for loan investors. Market sources said the manager is looking to reach a deal size as large as $650 million, despite the well-known challenge managers are facing in regard to competing for available new issue and finding good credits below par in the secondary market. Average deal size for cash flow arbitrage structures has been shrinking since last year to roughly $300-400 million. Officials at GoldenTree declined to provide any details.
A dealer familiar with the structure said that GoldenTree is one of a few funds that can target a deal size this large. "These guys have a great reputation and they're one of a handful of managers who could find the equity to support this deal," he said, noting the size of the deal is ambitious and GoldenTree has a reputation for careful asset selection. The dealer said a structural difference in the GoldenTree deal makes it more possible for the manager to fill up the vehicle's portfolio. "In their structure they can buy up revolvers as well as term loans and that opens up the market for them," he said. "It's quite possible there is a novel twist on the deal allowing for the size," said Chris Flanagan, analyst in J.P. Morgan's CDO research group, noting that the deal exceeds current deal size averages. The deal is reportedly slated to close mid-summer.