London-based New Bond Street Asset Management is marketing a synthetic collateralized debt obligation of high-grade corporate credits. The deal, called Piccadilly II, is the first the manager has offered globally and is arranged by Calyon. Officials at both firms declined comment ahead of its close next month.
Piccadilly II references a portfolio of 125 predominantly European credits with concentrations in telecommunications, insurance and financial sectors. Bespoke tranches with more U.S. credits are being offered to U.S. investors. It has an average credit rating of A minus, compared with BBB plus for Piccadilly I. It allows a 10% bucket for high-yield substitutions and trading ability for up to 20% of the names. Trading gains above a 40 basis-point cushion are held in a reserve account to cover potential future losses and are split 80/20 between investors and the manager at maturity. The manager can also monetize excess subordination for the reserve account and payout.
New Bond Street typically invests in its own deals and reportedly has invested EUR50 million already in the BBB minus tranche. The deal is expected to be about EUR300 million.