Salomon Smith Barney is preparing to market a synthetic collaterlized debt obligation referenced to a USD1 billion pool of investment-grade bonds that is expected to come to market by March. Los Angeles-based Trust Company of the West (TCW) will actively manage the CDO, which has been named Craigey Street. "They've managed a couple of our cash deals in the past. TCW has a very strong investment-grade team," said a Salomon official. He declined to provide further details on past deals. Officials at TCW did not return calls before press time.
As manager, TCW will be responsible for stemming potential losses on the CDO by reversing positions through the purchase of default protection on referenced credits. The reference portfolio will consist of 100 corporates.
Investors will be able to buy into the deal through three of four tranches of credit-linked notes. At this point, the specific rating on the tranches has yet to be determined. But one market official noted that it's likely there will be one super senior rated tranche, which will be sold as a credit default swap, and a AAA tranche. "There will probably be another lower rated one, but it has not been decided yet," the official added.
