Chicago-based middle-market lender Monroe Capital has raised $456.3 million from investors for a collateralized loan obligation fund, its second CLO closing in 12 months.
The CLO, formally called Monroe Capital MML CLO VI, is secured by a portfolio of middle market senior secured loans by Monroe, or that Monroe participated in as a club lender. Monroe sold securities in the CLO rated from AAA through BB, and the firm and its affiliates have retained a majority of the subordinated notes. The CLO will invest in more than 100 underlying loans to middle market companies, defined as those with $50 million Ebitda and less.
“We continue to see very strong interest in Monroe’s CLO platform. Our investor base continues to expand in the U.S., Europe and Asia,” says Monroe CEO Ted Koenig. “We are pleased to count many of our existing CLO investors in this transaction as well as several new investors.”
Monroe plans to raise one or two CLOs per year, with its next expected before yearend, says Jeremy VanDerMeid, managing director of Monroe. The firm has raised six CLOs, including five that are still active with $1.6 billion under management. Its previous CLO closed in October 2017.
VanDerMeid says the investor interest in the CLOs is driven in part by added yield—starting with 30 to 40 basis points more than other asset-based securities at the AAA level—and increasing interest from investors from Asia. Also, investors are becoming more comfortable with CLO managers in the middle market, like Monroe, that originate their own loans and that keep more of their own capital invested in the CLO.
Other firms have also been capitalizing on the building investor appetite for middle-market CLOs. The Carlyle Group (Nasdaq: CG) recently raised its fourth CLO fund, Carlyle US CLO 2017-4, with $613 million in capital commitments. Antares Capital raised a $2.1 billion CLO, Antares CLO 2017-1, which was its first. Trinitas Capital Management closed its sixth CLO, Trinitas VI, $717 million in capital commitments, the largest ever for Trinitas, and Madison Capital raised its seventh CLO.
Monroe, a private credit asset management firm founded in 2004, specializes in direct lending and private credit investing in the U.S. and Canada. The firm provides senior and junior debt financing to middle market businesses, special situation borrowers and private equity sponsors. Its investments include unitranche financings; cash-flow, asset-based and enterprise value based loans; and equity co-investments. In addition to its Chicago headquarters, Monroe has offices in Atlanta, Boston, Dallas, Los Angeles, New York and San Francisco.
Monroe has $5.2 billion total assets under management. It closed its second credit fund, called Monroe Capital Private Credit Fund II, at $800 million, targeting companies with between $3 million and $30 million in Ebitda.
Deutsche Bank served as the lead manager, structuring agent and bookrunner for the new CLO, which was structured to comply with both European and U.S. risk retention guidelines.