Clearlake secures $1bn CFO financing after restructuring collateral mix

Clearlake Capital Group has raised $1bn through a collateralised fund obligation (CFO) backed by stakes in its private market funds, after restructuring the transaction following discussions with prospective investors, according to a report by Bloomberg.

The report cites unnamed people familiar with the transaction as highlighting that the deal was revised to alter the mix of assets backing the securitisation, while also reducing leverage and improving pricing.

Goldman Sachs acted as sole structuring and placement agent for the transaction.

A newly created Clearlake vehicle will hold $600m of private credit exposure, alongside $200m of interests in a private equity secondaries fund and another $200m private equity fund stake. Those assets will collateralise $775m of Class A, B and C debt securities, with the remaining $225m raised through an equity tranche.

The restructuring enabled Clearlake to reduce the cost of its senior debt compared with the initial terms. The Class A bonds were priced at 285 basis points over the Secured Overnight Financing Rate (SOFR), 15 basis points below the original pricing discussed with investors.

The Class C notes, which rank behind the Class A debt for repayment, carry a spread of 800 basis points over SOFR. The equity tranche is expected to generate an internal rate of return of about 18%, according to people familiar with the deal.

The final structure differs from an earlier proposal that would have combined three private credit funds with two other private funds investing across different strategies. Investors had raised concerns about the amount of leverage in that version of the transaction, prompting Clearlake to revise the collateral package.