CDO Analysts Urge Investors To Sell

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  • 10 Nov 2003
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At least two collateralized debt obligation researchers are advising their buy-side clients to sell senior, seasoned CDO classes. They note that the senior classes have tightened dramatically versus new issue spreads since early this summer because of improving transparency and increased attention from dealers. For example, secondary high-yield bond spreads were roughly 50 basis points wider than new issue spreads in May, and the gap is now about five basis points in most cases, or 10-20 basis points at most, according to Sunita Ganapati, head of CDO research at Lehman Brothers. She says Lehman's desk has even seen CDOs of senior secured loans trade in the low 50s over LIBOR, or roughly flat to where new liabilities are priced. To be sure, trading has been concentrated in high-yield and leveraged loan-backed liabilities and other CDO types are not as liquid.

Nichol Bakalar, a director in CDO research at Wachovia Securities, says it is a particularly good time to sell high-yield and leveraged loan CDOs because there is pent-up demand from CDO squareds and multi-sector CDOs in the ramp-up process. "Generally speaking, they will want to stay away from structured finance CDOs," she says of the multi-sector deals, because they already contain asset-backed securities. "We are in the transitory phase from a buy-and-hold market to a market with a liquid secondary," she adds.

  • 10 Nov 2003

GlobalCapital European securitization league table

Rank Lead Manager/Arranger Total Volume $m No. of Deals Share % by Volume
1 Bank of America Merrill Lynch (BAML) 7,026 25 11.95
2 Citi 6,449 21 10.96
3 BNP Paribas 5,093 18 8.66
4 Barclays 4,040 11 6.87
5 Lloyds Bank 3,615 14 6.15

Bookrunners of Global Structured Finance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 1,505.59 4 23.86%
2 SG Corporate & Investment Banking 1,292.64 1 20.48%
2 Rabobank 1,292.64 1 20.48%
4 BNP Paribas 598.25 2 9.48%
5 TD Securities Inc 241.54 1 3.83%