As LMW went to press last week,Citigroup was reportedly auctioning off a $143 million portfolio of 57 names. The average coupon in the portfolio is LIBOR plus 305 and the portfolio was to be offered at 100.8. One trader remarked that this is lower than the average bid in the market and some of the other portfolio sales. The trader said the portfolio should carry some second-lien loans or some lower quality names. A Citi banker declined comment.
Portfolio auctions have been common all year as a number of collateralized loan obligations have reached the end of their reinvestment periods and have been liquidated. In the past few weeks Deutsche Bank bought a $128 million portfolio from Babson Capital Management for more than 101.31 (LMW, 10/11).
But Citigroup, Banc of America Securities, J.P. Morgan and Morgan Stanley have also put together similar packages that mimic a CLO portfolio. Earlier this year, Jonathan Calder, managing director of loan sales and trading, explained the need for portfolio trades arose from the number of managers ramping up caused by cash flowing into the asset class (6/25). One advantage is that the bank can provide the manager with a large diversified portfolio in one trade.
