New York-based Halcyon Asset Management is planning to dive into collateralized debt obligation issuance on a regular basis. According to Securitization News, a CIN sister publication, Halcyon is aiming to issue two to four asset-backed CDOs and CDO squareds by next year, each ranging from $300-400 million, said Rajesh Kumar, who joined Halcyon from ZAIS Group last week to start the effort.
As part of the push, Kumar plans to hire a CDO team of eight to 16 professionals consisting of two senior and two junior portfolio managers and six to eight analysts.
Kumar, managing principal, said regular CDO issuance will help lower mark-to-market volatility. "Being a mark-to-market vehicle the net asset value on structured finance securities may fluctuate a lot, which hedge fund investors don't like. At the same time, these structured finance assets are difficult to mark because they may trade only once in three months. [Being a CDO issuer] solves both problems," he said. He added CDOs also provide non-recourse term funding for illiquid assets.
The fund will launch its program with two deals this year. One will be an ABS CDO mostly backed by mezzanine home equity debt that will have the ability to be fully cash or synthetic. The CDO will have a large unfunded super senior portion that can be used to fund cash positions, while the cash position can also be used to put on more synthetic exposure, Kumar said. The other deal will be a CDO squared that will be backed by 70% triple-B, 20% double-B and 10% single-A CLO tranches. Halcyon is in the market with its first CLO, the $460 million Halcyon Structured Asset Management.
