Cerberus sees better value in its mezz than the market

Cerberus 230x
By Owen Sanderson
07 Nov 2019

Cerberus Capital Management is retaining all the mezz bonds for its refinancing of the Vantage portfolio of UK mortgages. As a financial sponsor, Cerberus would usually make full use of the leverage available in securitization, and sell a full capital structure, but if the market can’t hit its price targets for the mezzanine bonds, it would rather buy them itself than sell them cheap.

Part of the reason the trade works for Cerberus is that, if it buys mezzanine bonds, it can take some extra leverage on these through the repo market. Otherwise, it would end up stuck with mostly investment grade bonds whose discount margins would be miles away from its ...

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