Fair Oaks Income Fund has announced that it has exercised its right as majority holder of the Income Notes in T2 Income Fund CLO I Ltd to redeem all of the notes of T2 CLO. they say the liquidation of the remaining assets in T2 CLO is well underway with the vast majority of assets sold in mid-November, ahead of the recent market weakness. The redemption will be effective on T2 CLO’s next payment date, 15th January 2015.
Fair Oaks reckon they’ll get more than their current carrying value of the T2 CLO stake back in cash and, over the time that they’ve held this asset, they reckon they’ll have made an annualised return of 19.0%.
Part of the proceeds is being used to fund the acquisition of $21m notional of equity notes in Allegro CLO II Ltd., a new CLO backed by a portfolio of US broadly syndicated, secured loans managed by Axa Investment Managers. The CLO’s current target portfolio has a principal value of $400 million across an expected 120 unique bank loan issuers, with an expected weighted average exposure per issuer of approximately 0.9%. Fair Oaks say the potential total return for the investment in Allegro CLO II Ltd is between 15% and 18% per annum.
FAIR : Fair Oaks redeeming T2 CLO investment