Lloyds launches £1.27 billion SME CLO

Lloyds TSB Bank has set up an SME CLO named Sandown Gold 2011-1 in a balance sheet transaction. The deal totals £1.27 billion ($2.07 billion) and consists of loans extended to small and medium size enterprises in the UK. Fitch assigned the CLO its final ratings yesterday. The rating agency points out that 98% of the loans are secured by first-lien mortgages on residential or commercial property.

Sandown Gold 2011 has two senior tranches ranked pari passu. The A-1 class weighs in at £428 million and noteholders will pick up a coupon of 170bp over Libor. The A-2 class on the other hand is denominated in euros and is sized at €311 million, with investors getting a coupon of 160bp over Eurobor. Together these senior notes will be provided with 45.9% subordination.

There is added protection for investors in the form of a £40 million reserve fund which is in place to cover any defaults. Fitch also notes that the class A, B and C notes all come with a principal deficiency ledger, which will come into effect if the reserve fund is depleted.   

Sandown Gold 2011