The marketing for a new collateralized debt obligation set to be managed by State Street Research & Management has been put on hold in light of BlackRock's announced plans to acquire the Boston money manager, according a CDO investor familiar with the plans. Late last month, BlackRock ended months of speculation and said it would buy State Street Research for $375 million, in a deal that is not set to be complete until the first quarter of next year.
J.P. Morgan Securities had been shopping Hillcrest CDO I, a vehicle that intends to acquire structured finance assets to back $400 million in CDO liabilities, but the book-building effort for the transaction is said to now be on hold in light of the BlackRock purchase. "My understanding is they are going to wait and see what happens with State Street," said the investor. It is unclear if and when the marketing for the transaction will continue and likely depends on what BlackRock decides to do with State Street's CDO platform, since fixed-income titan BlackRock has said its main strategy in acquiring State Street is the manager's equity presence.
In general, collateral managers are critical to the performance of a transaction and anything that affects the asset manager is a wild card for the performance of the CDO, according to one analyst who is unfamiliar with this specific deal but said it made sense that it would be put on hold until there is more clarity. It is unclear how the acquisition will affect the CDO platform at State Street. Ron D'Vari, head of structured finance at State Street, and Tom Majewski, a J.P. Morgan banker said to be responsible for the transaction, did not return calls by press time.