Moelis Asset Management LP’s Steele Creek Investment Management LLC is seeking to raise a $413.5 million collateralized loan obligation, its first, according to a person with direct knowledge of the plan.
Steele Creek, which is a unit of a firm controlled by Kenneth Moelis, is arranging the fund with BNP Paribas SA, said the person, who asked not to be identified because terms of the deal are private.
Steele Creek, set up by Glenn Duffy and Matt Stouffer last year and based in Charlotte, North Carolina, is taking advantage of a resurgence in demand for funds that bundle speculative-grade loans. Sales of CLOs are on pace for a record year, with $63 billion of the deals issued in the U.S. in 2014, according to data compiled by JPMorgan Chase & Co.
Andrea Hurst, a spokeswoman for Steele Creek, declined to comment.
CLOs pool high-yield corporate loans and slice them into securities of varying risk and return, typically from AAA ratings down to B. The lowest-ranking portion, known as the equity tranche, offers the highest potential returns and the greatest risk because investors are the first to see their interest payouts reduced when loans backing the CLO default.
There were $82 billion of CLOs arranged in 2013, the third-largest year ever, according to Royal Bank of Scotland Group Plc data. Almost 20 new managers raised CLOs between January 2012 and June 2013, according to a July 2013 Moody’s Investors Service report.
The ratings firm said that many of these new issuers are affiliates of private-equity firms or other sponsors with “deep pockets” that provide financial and organizational support.
Leveraged loans are rated below BBB- by Standard & Poor’s and lower than Baa3 at Moody’s.