Jonathan Lavine, managing director and chief investment officer of Sankaty, did not return calls. A spokesman declined comment. Eric Lloyd, head of loan syndications at Wachovia, confirmed Wachovia won an auction last week, but declined to name the client. He said the purchase was on behalf of a diverse group of investors and would not be going onto Wachovia's balance sheet. "We are not going to hold onto this," he stated. He added that this is part of Wachovia's strategy to increase its presence in the market. "We continue to pick up market share in the new-issue side and increase our presence in the secondary market. The continued growth of those two is extremely important for our organization," he said.
Wachovia's fees from corporate loans rose 36 percent to $743 million in the first quarter from a year earlier, according to a May 7 filing with the Securities and Exchange Commission. The bank is now fifth in leveraged loan underwriting by volume and third by deals, Lloyd said.
A trader said the equity investors in the CLO wanted to cash out once it had hit the end of the reinvestment period. A source noted the auction was "hugely successful for Sankaty." The manager has over $3.3 billion in bank loan investments and over 10 loan deals.
Another trader said the portfolio contained 150 mostly par names and had to be bid for in its entirety. Sankaty realized they would get more by selling it as a whole rather than piecemeal, a source said. Portfolio auctions have shot up in frequency this year. CLOs hitting the end of reinvestment periods and the demise of certain vehicles, such as the Sequils Mincs and KZH transactions, have led to most of the sales. Meanwhile, massive demand from investors having to ramp up quickly has created a captive buying audience for portfolio trades.