Amaranth Sells NIMs Portfolio

Amaranth Advisors has sold at least most of a $572.5 million portfolio of net-interest margin bonds in the wake of $6 billion in energy trading losses.

  • 29 Sep 2006
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Amaranth Advisors has sold at least most of a $572.5 million portfolio of net-interest margin bonds in the wake of $6 billion in energy trading losses. According to Securitization News, a CIN sister publication, the Greenwich, Conn.-based firm feared being underbid on its energy portfolio and, wanting to raise money, decided to compensate by selling off assets that were not under as much pressure, one auction participant said. According to published reports, the company is in talks to sell a stake in the company to Citigroup, but is also considering shutting down.

NIMs are backed by the excess spread and prepayment bonds from home equity ABS. Amaranth originally offered the bonds to a couple of dealers on Sept. 15, later expanding the offering to a few more by the following Monday. Those dealers then brought in a select set of investors, who met the offer with good demand.

The bid list was unusual for the number of bonds on offer at one time and for its composition. "You're looking at 20-30 bonds versus the average of one to two," said one auction participant. Besides the NIMs, the list included preferred shares of NIMs, which have ownership rights to the underlying residuals. Offering them on a bid list was also a first, noted a participant.

While one participant saw the large bid list and resultant liquidity as a one-off, another thought it signaled growing liquidity in the NIMs market. "It's probably a sign of the market's broadening. Before, sellers would typically go to one or two Street firms who would work an order for them," the trader said.

An Amaranth spokesman declined comment.

  • 29 Sep 2006

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