TCW Asset Management is in the process of completing what will be the largest-ever collateralized debt obligation of asset-backed bonds. The transaction, South Coast IV, is a $1 billion cash funded offering that Merrill Lynch is underwriting. The deal is noteworthy because transactions of the size tend to be synthetic offerings so they do not have to acquire all of the underlying collateral, according to a person familiar with South Coast IV's structure. Furthermore, other large ABS CDOs feature money market tranches that allow it to sell more liabilities while cutting down on the amount of assets it has to ramp up (BW, 9/29); this transaction, however, does not have a short-term money market tranche and is a fully term deal, according to the official.
The transaction is expected to close by the end of the year. Marc Stearn, president of TCW, did not return a call and Chris Ricciardi, head of structured credit products at Merrill, declined to comment.