Feingold O'Keeffe Capital, the Boston-based hedge fund, recently priced its second collateralized loan obligation, Emerson Place CLO 1, a $350 million portfolio led by Morgan Stanley. It priced its first CLO, Avery Street, a $300 million portfolio also led by Morgan Stanley, in February. The firm is expected to do a third vehicle next year.
"We haven't set a pace [of doing a specific number of CLOs], but we will most likely issue another vehicle in 2007," said Scott D'Orsi, portfolio manager. "We are very much a day-to-day participant in the bank loan market. We are not pre-committed to doing a certain number, but two in a given year is probably as much as we would do."
Emerson Place is managed by D'Orsi as well as founding partners, Andrea Feingold and Ian O'Keeffe. The portfolio's triple-A liabilities are priced at 25, which was inside the 26.5 triple-A pricing of Avery Street earlier in the year. The equity piece is 7 1/2% and there is a bucket for second liens of 10%.
Morgan Stanley was chosen to lead the firm's first CLO and then again based on the relationship the two parties have, as well as the reputation MS has in the CLO space.
"We have a great relationship with them in our leveraged loan business as well as our high-yield business," D'Orsi said. "I think they are regarded [well] by CLO investors and we felt it was important to use [someone highly regarded] as a first time issuer with Avery Street and we were pleased with the execution there so we continued to work with them on this one."