London-based fund manager New Bond Street Asset Management, with over EUR4 billion under management, has launched a USD1 billion cash-flow collateralized debt obligation. The deal is backed by high-grade U.S. cash and synthetic CDOs and asset-backed securities and is the manager's first CDO of structured finance securities.
The portfolio comprises all CDOs at the outset, but there is a 20% corporate synthetic bucket. This will be used for third-party managed collateralized swap obligations as well as deals managed by NBSAM's own dedicated CSO team. Participation it its own deals, however, is capped at 10% and they must be AAA rated, says Harald Berlinicke, partner and senior portfolio manager at the firm, who is lead portfolio manager on the CDO. The structure also allows for the inclusion of U.S. residential and commercial mortgage-backed securities during the eight-and-a-half-year reinvestment period, while assets underlying the CDO can still be altered.
In the structure, dubbed New Bond Street CDO, the manager can only invest in assets rated AA and above, which Berlinicke says makes it a true "super high-grade deal" and is a feature which appealed to investors. "There are an increasing number of high-grade CDO of ABS deals out there today which include big buckets of single A and BBB underlyings and hardly deserve the tag of high-grade, but this is different," he said. The CDO was road showed to institutional investors in Europe and Asia and priced last week. Four classes of rated notes were offered. The first, rated AAA/Aaa by both Standard & Poor's and Moody's Investors Service, returns 30 basis points over three-month LIBOR. The remaining classes, rated by Moody's only, return 35 bps for Aaa, 50 bps for Aa2 and 175 bps for Baa3.
IXIS Corporate & Investment Bank arranged the structure and has been issued the super senior class of notes. With strong investor appetite for high-grade exposure, especially in CDOs of ABS, Agnes Courrege, structured product marketer at IXIS in Paris, said the firm is happy with the deal's diversified underlying and the management style of NBSAM.
