A German collateralized debt obligation manager plans to launch two cash-flow CDOs by mid-2005. Munich-based Hypo Real Estate Bank will bring a €200 million CDO of mortgage-backed securities, Euromax-4, to the market by early 2005. This will be followed by a €1 billion CDO of MBS, House of Europe-4, around the middle of 2005, according to Dirk Bergander, head of securitization and structured finance in Munich. Hypo Real Estate Bank provides financing to commercial real estate clients in Germany and has €10 billion in assets under management in structured finance including seven cash-flow CDOs.
Bergander's priority is Euromax-4, a single-A to double-B backed deal with 50% in residential mortgage-backed securities, 40% in commercial mortgage-backeds and a 10% CDO bucket. "This is a very well-diversified portfolio from a regional perspective, without the concentration in Dutch RMBS we had in Euromax-3 or any disproportionate weighting in the U.K.," said Bergander. The RMBS bucket is now complete but CMBS still needs to be bought. "It is definitely harder to buy assets than it was one year ago," remarked Bergander.
The second deal, House of Europe-4, will consist in triple-A to single-A rated assets. "A high-grade deal of this kind needs to be at least €1 billion in size," noted Bergander, commenting that high-grade assets are especially sensitive to fluctuations in spreads. Hypo Real Estate closed House of Europe-3 last month and anticipates it will need about six months to ramp up the assets for the next deal.
