BofA Preps CDO With Novel Super Senior Tranche

  • 03 Feb 2003
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Bank of America Securities has begun to market an EUR1 billion (USD1.08 billion) collateralized debt obligation, called Anchor CDO I that features what is believed to be the first junior super senior tranche. Mitch Braselton, head of global structured products marketing for Europe, Middle East and Africa in London, says one motivation behind structuring a deal like Anchor is that monolines and reinsurers--super senior swap providers--are demanding more subordination in deals.

The junior super senior tranche is a triple A rated piece carved out of the bottom of the super senior tranche. It is a funded note designed to appeal to investors concerned about ratings downgrades, particularly structured investment vehicles and commercial paper conduits, explains Mitchell Lench, managing director in structured products at BofA in London.

The junior super senior tranche will pay investors about 50 basis points over Euribor and has the characteristics of a note, says Lench. The super senior tranche, which will pay 10 basis points over Euribor, will be unfunded. All the tranches below the super senior are funded, or are backed by the cashflow of the underlying structured products. The CDO has a six-year average weighted life.

The deal's underlying collateral will be triple A rated structured products--asset-backeds, CDOs, mortgage-backeds, for example--selected by Harbourmaster.

  • 03 Feb 2003

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