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CharterMac Maps Out First CDO

24 Feb 2006

CharterMac, a New York-based real estate finance company, is gearing up for its first collateralized debt obligation and a joint venture with IXIS Capital to write credit-default swaps and provide credit enhancement on commercial real estate loans.

CharterMac, a New York-based real estate finance company, is gearing up for its first collateralized debt obligation and a joint venture with IXIS Capital to write credit-default swaps and provide credit enhancement on commercial real estate loans.

The CDO is planned for release before the end of the second quarter and will be about USD300 million, said Patti Saylor, managing director. The aim is to complete about USD600 million of CDOs this year. The program will be backed by small loans originated by CharterMac Direct, added Hilary Ginsberg, v.p. CharterMac plans to retain the B pieces.

On the credit front, CharterMac and French-owned IXIS have formed Centerbrook Financial, which will be an AAA-rated subsidiary of CharterMac. Centerbrook will provide credit enhancements via credit-default swaps for the company's securitizations and tax-credit partnerships. It will also replace CharterMac's credit enhancement for 80/20 deals. The company currently buys credit enhancement from third parties and spent USD17 million on credit enhancement last year, Ginsberg said.

Centerbrook will allow CharterMac to provide its own credit enhancements and credit protection, transforming it from a user to a provider. This is the first time a real estate lender has done this, Ginsberg said.

24 Feb 2006