Maxim Advisory has launched its first mezzanine grade cash flow collateralized debt obligation, Lexington Capital. The vehicle will invest in other CDOs as well as asset-backed and commercial and residential mortgage-backed securities, explained Wing Chau, managing director at Maxim.
Fitch Ratings has rated $135 million of class A-1AV senior secured floating rates notes AAA; just under $200 million of class A-1ANV first priority senior secured floating rate notes AAA; and $250,000 class A-1B first priority senior secured floating rate notes AAA. "The class A notes have been divided into the three tranches, including voting and non-voting classes," said Amit Pathak, associate director at Fitch.
Additionally, $72 million of class A-2 second priority senior secured floating rate notes have been rated AAA; $44 million class B third priority senior secured floating rate notes have been rated AA;, $10 million of class C fourth priority senior deferrable secured floating rate notes have been rated A; $19 million of class D fifth priority senior deferrable secured floating rate notes are at BBB; and $5 million class E sixth priority mezzanine deferrable secured floating rate notes have been assigned a BB+ rating. All classes of the notes are due May 6, 2042.
Pricing on the three tranches of the class A1 notes is LIBOR plus 27.5 basis points. The class A2s are LIBOR plus 45 basis points; the class B notes are LIBOR plus 60 basis points; the class D notes are LIBOR plus 270 basis points and the class E notes are LIBOR plus 550 basis points. Pricing on the class C notes was not offered, said Chau.
Fitch's ratings are based on the high credit quality of the underlying assets and the fact that 80% of these assets will be purchased by the time the transaction closes. Another factor in the ratings lies with the credit enhancement provided by support form subordination, excess spread and protections that are part of the structure.
Prior to Lexington, Maxim had closed three CDOs, the $750 million Jupiter High Grade CDO I, the $1 billion dollar Jupiter High Grade CDO II and the $2 billion Jupiter High Grade CDO III. Lexington is classified as an arbitrage cash flow CDO.