Spire raises €387m for CLO

According to sources, the latest CLO has the lowest cost of capital for a European CLO since the financial crisis.

Spire Partners has raised €387 million for its latest CLO. The new offering – the Aurium CLO III – was priced by Barclays.

The most senior tranches of the CLO are set to yield Euribor plus 88 basis points. The subordinated portion of the CLO will yield Euribor plus 690 basis points, according to information released by Barclays. 

The cost of capital for the CLO – the weighted average cost of the debt to the fund – is 163 basis points. This represents the lowest cost of capital on a CLO issued in Europe post the financial crisis, a source familiar with the market noted. A lower cost of capital increases returns to equity holders in the CLO. 

The latest CLO narrowly beats its predecessor – the Aurium CLO II – which was priced at €360 million in June 2016. The firm’s first CLO raised €300 million. Investors often look to these offerings for higher yields, particularly in low-rate environments. A source familiar with the fundraising for the CLO noted Spire had seen both new and existing investors commit to the latest CLO. 

Despite this investor demand, managers have also told PDI CLO issuance is likely to be sluggish in the early part of this year. 

Jonathan Bowers, partner at CVC Credit Partners, recently told PDI issuance of CLOs has slowed down due to a lack of collateral being available for CLO managers. By contrast, the tail-end of 2016 did see a relative flurry of activity with the likes of Wellfleet Credit Partners, Carlyle Group and GSO Capital Partners pricing CLOs.