A quartet of former collateralized debt obligation professionals from Westdeutsche Landesbank have set up their own firm and are planning to issue the first of several structured finance CDO transactions. Church Tavern Advisors LLC is gathering investors for a $400 million repackaging of subordinate asset-backed bonds, according to Bill McCormick, a partner and one of the four. The underlying-assets will be from a mix of ABS sectors with a focus on real estate-related bonds, he adds. The deal is being marketed as Saturn Ventures I.
The other team members are Wesley Sparks, Andrew Waine and Eric Seward. The four, who have set up shop in Harrison, N.Y., are considered the architects of WestLB's Blue Heron transactions, which were innovative because they collateralized high-quality assets and sold money market tranches, according to several CDO pros. This format has since been followed by other collateral managers seeking to attract new investors, as well as structure a deal attractive enough to those mindful of the past performance of some CDOs that pooled lower-quality assets (BW, 9/29). The structure is also easier to place with investors because its equity component is not as large--although it is more leveraged--than that of a deal with lower-quality assets. For example, McCormick notes the equity component of triple-B deal is 20 times levered, while equity classes of deals with higher-quality assets can be 100 to 200 times geared.
McCormick says Church Tavern has a second CDO already lined up, dubbed Millstone Funding, which will raise cash from investors and repackage asset-backed assets with an average rating of double-A. It should be in the market by the end of the year, he says.
Outsiders add Church Tavern is part of a growing trend whereby former Wall Street structured finance professionals are setting up their own shops to repackage asset-backed paper. For example, Dansby White, a former Merrill Lynch structured finance honcho, has set up a similar firm in New Jersey.
Citigroup will underwrite both of Church Tavern's offerings. Darius Grant, the banker on Saturn Ventures, did not return a call.