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Derivatives

Aussie House Readies Mezz CDO Deal

Australia's Grange Securities is preparing to issue a mezzanine-tranche synthetic CDO in the coming weeks, co-arranged by Royal Bank of Canada.

Australia's Grange Securities is preparing to issue a mezzanine-tranche synthetic CDO in the coming weeks, co-arranged by Royal Bank of Canada. "We're buying back an existing deal and expect clients to switch into this," said Moray Vincent, director in debt capital markets at Grange in Sydney. The mezzanine deal, on a global portfolio made up of 80% investment grade and 20% high-yield names, will replace a CDO the company structured with RBC last year with a slightly altered portfolio, for instance replacing higher-volatility credits such as Delphi. Vincent said he also expects new interest in the portfolio and is targeting total investments of AUD80-100 million (USD61.2-76.5 million). The deal will settle at the end of the month.

The deal is Grange's 27th CDO in Australia, a business line it started for retail and wholesale clients three years ago. The range of transactions include one of the first widely-distributed ethically-based CDOs, for which it partnered with JPMorgan and Italy's E. Capital Partners earlier this year, as well as ABS CDOs and CDO squared transactions. The securities house, which underwrites the structures, has also co-arranged issues with a handful of firms including Deutsche Bank,BNP Paribas, Lehman Brothers, Credit Suisse First Boston, Nomura Securities and Calyon. "We have good relationships with everybody. We look at where their different strengths are," added Vincent.

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