Citigroup Inc. sold a $416.2 million collateralized loan obligation for Doral Leveraged Asset Management, according to three people with knowledge of the deal.
The CLO includes a $269.5 million slice rated AAA by Standard & Poor’s that pays an interest rate of 147 basis points more than the London interbank offered rate, said the people, who declined to be identified because the terms are private.
There have been $5.6 billion of CLOs backed by widely syndicated loans sold this year up from $1.2 billion issued in the first three months of last year, according to data compiled by Bloomberg. That compares with $91.1 billion of CLOs raised at the height of the market in 2007, according to Morgan Stanley data.
Goldman Sachs Group Inc. arranged a $450 million CLO for Doral with Babson Capital Management LLC as the collateral adviser in June 2010, according to Bloomberg data.
CLOs are a type of collateralized debt obligation that pool high-yield, high-risk loans and slice them into securities of varying risk and return.
Scott Helfman, a Citigroup spokesman, and Lucienne Gigante, a Doral spokeswoman, declined to comment.
CLO formation has increased as the secondary spreads on portions of the funds rated AAA has decreased. Yields on AAA graded pieces dropped to 185 basis points more than Libor on March 1, down from 240 basis points at the start of the year, according to Morgan Stanley data.
Libor is the rate at which banks say they can borrow in dollars from each other. A basis point is 0.01 percentage point.
The price of the underlying loans has been rising, with the S&P/LSTA U.S. Leveraged Loan 100 Index reaching a high this year of 93.84 cents on the dollar on March 28. The measure closed at 93.74 cents March 30.
Leveraged loans are those rated below BBB- by S&P and less than Baa3 at Moody’s Investors Service.