Cerberus launches monster mezz sale as repo terms worsen

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By Owen Sanderson, Tom Brown
20 Oct 2020

Cerberus Capital Management is selling one of the largest ever portfolios of UK mezzanine mortgage bonds on Thursday, following a deterioration in the terms available in the ABS repo market after the huge volatility seen in the Covid crisis. The sale comes the same week as the sale of the last tranche of mortgages by government bad bank UK Asset Resolution, which could also flood the market with mezzanine supply.

The 48-item list from Cerberus totals around £595m in notional original volume but because nearly every bond is deeply subordinated, the effective risks associated with the portfolio are huge. One ABS trader estimated that an investment bank would have to hold £4bn in risk-weighted assets against the portfolio ...

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