Goff-Moore Strategic Partners, a private equity firm, is teaming up with GMAC Institutional Advisors, an established investor in commercial mortgage-backed securities, to make its collateralized debt obligation debut. The two firms have created a joint venture, G Funds Asset Management, which will act as collateral manager on $615 million in CDO liabilities backed mainly by commercial mortgage-backed securities, according to outside officials. "It's the first time they've done a CDO," says one observer, who adds the deal is being dubbed G-Force 2003-1. He notes, however, that GMAC's team will likely select collateral and perform the basic infrastructure for the CDOs, while Goff-Moore is likely part of the transaction to place some of the subordinate and equity notes. "They're just helping place the debt, they're not managing the deal," he says, adding "it's a sign that private equity clients are comfortable putting money to work in CDOs." Hugh Balloch, a principal for the firm, declined to comment through a spokeswoman given that the deal has not yet closed and Brian DiDonato, managing director at GMAC, did not return a call.
Mia Koo, a director in the ABS CDO group at Fitch Ratings, says the deal is one of the first in which a CDO manager receives credit enhancement discount. Under Fitch's new CDO methodology, collateral managers who are highly ranked by its CDO manager ratings team can achieve up to a 5% discount on subordination for triple-A classes; GMAC's management team recently received an overall 1.5 rating, on a scale of one to four with one being the highest. Additionally, triple-B bonds can receive up to a 12.5% discount depending on the quality of the manager, Koo says.