Jefferies is set to launch a new middle market collateralised loan obligation (CLO) at a size of $404.32m (£301.9m).
The underlying portfolio will consist primarily of US dollar-denominated senior secured loans to middle market corporate borrowers.
Managed by Jefferies Credit Management, the transaction will be collateralised by at least 95 per cent senior secured loans and eligible investments, of which 91.1 per cent have credit ratings and 1.3 per cent have “recovery” ratings assigned by S&P Global Ratings.
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The ratings agency said the preliminary ratings it has assigned to Jefferies Credit Partners BDC CLO II’s floating-rate debt reflect the diversification of the collateral pool, which consists primarily of middle market speculative-grade senior secured term loans – those rated “BB+” and lower.
The experience of the collateral manager’s team, “which can affect the performance of the rated debt through portfolio identification and ongoing management”, is also reflected in the preliminary ratings, while the transaction’s legal structure is likely to be “bankruptcy remote”.
S&P Global Ratings stated it believes “this CLO has adequate cushion between the tranches’ break-even default rates and scenario default rates to address the possibility of near-term changes to the portfolio’s credit quality”.
“In some cases, our credit and cash flow analysis suggest that the available credit enhancement for the CLO debt could withstand stresses commensurate with higher rating levels than those we have assigned,” the firm stated.
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Jefferies Credit Management manages six private credit CLOs and has $2.4bn in private credit CLO assets under management.
Analysis of previous CLO 2.0 transactions – those issued after the financial crisis – that are managed by Jefferies Credit Management and its affiliates, and rated by S&P Global Ratings, revealed an average overlap in collateral composition of 8.58 per cent, which is lower than the average of 14.5 per cent for all CLO 2.0 transactions rated by S&P Global Ratings.
It also identified an average portfolio turnover rate of 23.4 per cent over the past 12 months, which is higher than the average of 19.51 per cent for all CLO 2.0 transactions rated by S&P Global Ratings, as well as an industry concentration that favours software.
The transaction is expected to close on 2 April 2026.
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