Cerberus challenges market to digest flood of mezz

By Owen Sanderson, Tom Brown
22 Oct 2020

Cerberus Capital Management auctioned off 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 Covid crisis made it uneconomic to continue to hold the deeply subordinated and risky positions.

The 48-item list from Cerberus totals about £595m ($778m) 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 ...

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