LNR Property Corp., a commercial mortgage-backed investor, is preparing its second collateralized debt obligation of underlying structured finance bonds, according to market professionals. The Miami Beach, Fla.-based company is shopping notes in a $763 million static offering that will be used primarily as a balance sheet funding vehicle. LNR will use the proceeds to buy lower-rated CMBS. John Malysa, a managing director at Fitch Ratings, notes spreads on underlying CMBS have tightened to the point where executing a CMBS-backed CDO for arbitrage reasons would be hard to do. LNR, which did a similar deal about a year ago, will issue the CDO to fund purchases of CMBS paper rated single-B plus and below, Malysa says.
Bob Cherry, LNR's head of CMBS acquisition and finance who was recently promoted to cio, and Scott Waynebern, director of the CDO syndicate at underwriter Deutsche Bank, did not return calls.