Arbor Realty Trust Inc. (ABR) announced the closing of a $125 million collateralized loan obligation or CLO issued by two newly-formed subsidiaries of Arbor. An aggregate of $87.5 million of investment grade-rated debt was issued, and Arbor retained an equity interest in the portfolio with a notional amount of $37.5 million.
The notes have an initial weighted average spread of about 339 basis points over one-month LIBOR, excluding fees and transaction costs. The facility has a two-year replenishment period that allows the principal proceeds from repayments of the collateral assets to be reinvested in qualifying replacement assets, subject to certain conditions. The closing of this transaction provides Arbor with approximately $32 million of liquidity and approximately $42 million of capacity in short term credit facilities, due to the transfer of certain assets into the CLO.
The notes were issued under a common indenture and, initially, are secured by a portfolio of real estate related assets and cash with a face value of approximately $125 million, with real estate related assets consisting almost entirely of first mortgage bridge loans.
Arbor said it intends to own the portfolio of real estate-related assets until its maturity and expects to account for this transaction on its balance sheet as a financing. Arbor stated that it will use the proceeds of this offering to repay borrowings under its current credit facilities, pay transaction expenses and to fund future loans and investments.
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