Clearlake secures $1bn CFO financing after restructuring collateral mix

Clearlake Capital Group successfully raised $1 billion through a collateralized fund obligation (CFO) by restructuring the transaction following talks with potential investors, according to Bloomberg. A source familiar with the deal revealed that the restructuring involved adjusting the assets backing the securitization, decreasing leverage, and improving pricing. The transaction was exclusively structured and placed by Goldman Sachs.

The newly established Clearlake vehicle will hold $600 million in private credit exposure, complemented by $200 million in stakes in a private equity secondaries fund and another $200 million in a private equity fund stake. These assets will serve as collateral for $775 million in Class A, B, and C debt securities. The remaining $225 million was secured through an equity tranche.

The restructuring enabled Clearlake to lower the cost of its senior debt compared to the initial terms. Class A bonds were issued at 285 basis points over the Secured Overnight Financing Rate (SOFR), 15 basis points lower than the original pricing discussed with investors. Class C notes, which rank behind Class A debt for repayment, carry a spread of 800 basis points over SOFR. The equity tranche is anticipated to generate an internal rate of return of approximately 18%, as per sources familiar with the deal.

The final structure deviates from an earlier proposal that would have merged three private credit funds with two additional private funds investing across varied strategies. Investors had expressed concerns over the level of leverage in that iteration of the transaction, leading Clearlake to revise the collateral package.