3i closes fourth European CLO at €466.5m

The new fund brings 3i’s US and European CLO total for the year to over $2.7 billion.

3i Debt Management has closed its fifth CLO of the year, according to a statement from the credit investor. The €466.5 million Harvest CLO X is its fourth European 2.0 CLO.

The firm closed Harvest IX at €525 million in July, as reported. Like that vehicle, Harvest X is structured as a loan-only investment to comply with the US Volcker rule and meets the European 5 percent risk retention rules.

In August, 3i managing partner, Jeremy Ghose spoke to PDI sister publication PFM about why they have opted raise Volcker-compliant European CLOs even though the rule does not apply to non-US vehicles.

“Our view is that the Volcker rule is here to stay. The US banks absolutely have to follow it and slowly and steadily banks in Europe doing any type of business in the US will also have to follow it. As a result, we are finding that the big European banks in particular are very keen to stay on the right side of the Volcker rule,” said Ghose. 

The €466.5 million total investment is split across various credit ratings with investment grade making up €374.7 million of the total with the remaining €91.8 million in non-investment grade mezzanine and subordinated notes.

Final maturity will be in November 2028 and Harvest X will mainly invest in Eruopean senior secured loans for private equity acquisitions across the continent, according to the statement.

The vehicle has a four-year investment period and is non-call for two years.

Broken down into classes the CLO comprises €264.4 million in class A, rated ‘AAA’ by S&P and Fitch and paying Euribor plus 1.25 percent; €56.3 million class B rated ‘AA+’ paying E + 2.07 percent; €30.4 million ‘A’ class C notes paying E + 2.3 percent and €23.6 million class D notes rated ‘BBB’ and paying E + 3.2 percent. The non-investment grade classes comprise €29.2 million class E notes rated ‘BB’ paying E + 5 percent; €12.4 million class F notes rated ‘B’ and paying E + 6 percent as well as €50.2 million unrated subordinated notes.

In June, the New York arm of 3iDM closed a $618 million US CLO called Jamestown IV. That followed the close of the $416 million COA Summit US CLO and the €425 million Harvest VIII European CLO, in March this year.

3i Debt Management had total assets under management of around $11 billion as of 31 March 2014.