Solent Capital, a USD5 billion asset manager in London, is managing its first synthetic mezzanine collateralized debt obligation referencing U.S. residential mortgage-backed securities. The USD750 million deal, called Halyard CDO I, includes a short bucket up to 15%, which is funded by excess spreads generated on the rest of the portfolio.
Jonathan Laredo, portfolio manager in London, said Solent has had a "mildly bearish" view on the U.S. housing market for about 15 months and waited to issue its first mezz RMBS CDO because most dealers were structuring only long-only deals. "We wanted protection in order to do a mezz deal and [the short bucket] gives us a little stability in the event of a soft landing," he said. "Otherwise we would have issued more deals by now."
Solent chose Credit Suisse as its arranger because it was the first to agree to the structure, Laredo said. Halyard will close today with a majority of U.S. investors--because they are most comfortable with the asset class--and the rest in Europe and Asia.
