Loan asset management heavyweights INVESCO, Deerfield Capital Management and American Express Asset Management (AMEX) have joined the roster of managers seeking to raise new collateralized loan obligations. This is despite some carping from portfolio managers about a lack of buying opportunities in the primary and secondary market, skinny allocations and tight spreads on the available deals.
But partially offsetting these problems is cheap financing on the liabilities and some lower expectations for equity returns. One CDO structurer said returns of up to 15% are probably no longer appropriate. Another CDO analyst believes that "the new 'norm' for AAAs, on a weighted-average basis, could well be in the [LIBOR plus] 40s." The CDO structurer added that the pipeline will be dominated by the strongest managers. "Those with strong access and clout to source [loans] will get deals done," he said.
Anthony Clemente, managing director at INVESCO, Jonathan Trutter, Deerfield's cio, and Lynn Hopton, a senior managing director at AMEX, did not return calls by press time. Wachovia Securities is said to be marketing the $400 million INVESCO deal, called Champlain. Bank of America is leading Deerfield's $415 million Long Grove and UBS is leading AMEX's $400 million Centurion VII.