The Blackstone Group priced its third collateralized debt obligation, the $1 billion Monument Park offering, at the tail end of last year, doubling the senior secured asset management capacity for the private equity heavyweight. UBS Securities acted as underwriter on the transaction, which is one of the largest cash-flow CDOs issued in years. Dean Criares, managing director and portfolio manager for Blackstone Debt Advisors, declined to comment.
To accommodate the size of the transaction, the vehicle is structured like a delayed-draw senior secured investment with an 18-month drawdown. In other words, Blackstone has already found buyers and set levels but will not actually issue the full $1 billion in liabilities until it has acquired all of the underlying collateral; it was about 30% ramped up as of last week. Blackstone will "pay as they go," explains one official familiar with the transaction. a source. For example, the triple-A notes represent just north of 82% of the liabilities, but only a portion of this tranche was actually issued. The top-rated tranche priced at LIBOR plus 55 basis points, which is a couple basis points wider than where liabilities backed ny similar collateral have been priced recently. Market officials attributed the higher cost to the size of the deal.
Still, one CDO investor says a large deal with a draw-down issue timetable is attractive because it allows the collateral manager to focus on credit work, while deals that are issued all at once require a greater emphasis on marketing. "Managers can be three to six months on the road, not focusing on what they are managing. Dean is sitting in New York on the credit side," he reasons.
Criares joined Blackstone at the beginning of 2002 from Trimaran Advisors. That year, Blackstone completed its debut deal, the $600 million Hanover Square transaction with CIBC World Markets and JP Morgan Securities. The second deal, completed about a year ago, was the $400 million Union Square offering, which was led by Credit Suisse First Boston. Blackstone names its CDOs after parks in New York.