AXA Investment Managers Paris is bringing to market a pair of collateralized debt obligations which re-visit the group's established synthetic structures Jazz and Adagio. In the deals, AXA will manage the underlying portfolios using a mix of total-return swaps and long or short credit-default positions to maximize returns. It is also able to go short a name without holding the underlying credit position in the portfolios.
Jazz CDO III is a hybrid cash and synthetic structure which differs from its predecessors in that the underlying portfolio of bonds, loans and swaps now includes a small bucket of correlation instruments. "These are quasi-equity single-tranche CDOs," said an official close to the transaction. In addition, Deutsche Bank, which arranged Jazz I and II, has been replaced by joint arrangers Merrill Lynch and IXIS Corporate & Investment Banking. Officials from AXA did not respond to phone messages or emails by press time.
The deal is currently being road showed globally and investors are being offered notes denominated in either U.S. dollars or euros. Officials at IXIS and Merrill declined comment and a target notional and indicative pricing could not be determined. Marketing is expected to end late August. Jazz was an innovative structure when launched in 2001 because it was one of the first underlying credit-default swap portfolios actively managed by a third party.
Adagio CDO III is a cash-flow collateralized loan obligation in which AXA can enter short CDS positions to hedge the risk of loan obligors in the underlying portfolio, as well as go short obligors not in the portfolio to maximize returns. Officials from Lehman Brothers, which arranged the deal, did not return phone messages by press time.
