Deutsche Bank and ZAIS Group, a USD8 billion collateralized debt obligation manager, have launched a deal referencing vintage asset-backed securities through pay-as-you-go credit-default swaps. The USD400 million CDO, launched Jan. 11, references a portfolio of residential mortgage-backed collateral. At least half the collateral is from 2003, 2004 and 2005. Denise Crowley, senior portfolio manager at ZAIS, said she expects the deal--named ZING VIII--to be priced in coming weeks. She also said she is considering upsizing the deal to USD450-500 million depending on interest.
At inception, Crowley expects the deal to be 70% synthetic with 100% synthetic potential. "The proliferation of ABS CDS and the convergence of PAUG technology opened doors and enabled us to target vintage collateral we like that is not available in the cash market," Crowley said.
The last five ZING deals also referenced seasoned collateral, "up and down the capital structure," Crowley said. This provides a more diversified portfolio of assets and greater flexibility for reinvesting in future portfolios. "It represents the market during different periods of time," said an official close to the deal. "And it takes advantage of PAUG technology to access a broader pool of potential collateral."
