PIMCO Europe is adding an emerging market synthetic collateralized debt obligation to its management portfolio. The European arm of the mega U.S. firm which runs USD445 billion in assets will manage the underlying pool of 40 low- or sub-investment grade corporates, quasi-sovereign and sovereign names by substituting up to 25 credits, with a rating of above B minus, annually.
In addition, PIMCO has the ability to pay bonus returns to investors up to 12 times annually, on top of the semi-annual coupon, by increasing the subordination of the five tranches. To do this, PIMCO must satisfy a Standard & Poor's over-collateralization test, which quantifies the likelihood of the tranche's rating being affected, plus achieve a trading gain of at least 50 basis points.
Arranged by Goldman Sachs, the 10-year floating-rate notes are denominated in either U.S. dollars or euros. They have been assigned preliminary ratings of AAA to BB minus by S&P. Officials from Goldman's and PIMCO referred calls to their press offices. Rebecca Nelson, spokeswoman for Goldman in London, and Mark Porterfield, spokesman for PIMCO in New York, both declined comment. The trade's target investors, notional and closing date could not be determined.
