Collateralized debt obligation issuers see a big value in including commercial mortgage backed securities in deals and expect more fully synthetic CMBS deals referencing lower-rated bonds to be crafted in both the bespoke and public markets. While so-called pure commercial real estate CDOs have included bonds from eight to 10 separate conduit deals, pure CMBS deals are starting to include 70 to 80 names at the BB minus and BB level.
"This is a more attractive profile for the bondholders," said Ron D'Vari, head of structured finance CDOs at BlackRock Financial, who noted savings of up to 15 bps at the AAA level when comparing CMBS collateral with other asset-backed securities. Another bonus for issuers is that the International Swaps and Derivatives Association's pay-as-you-go documents for CMBS are the simplest of all the ABS templates and dealers have had the least amount of contention with these documents.
