FTN Financial and Keefe Bruyette & Woods are in the market with a $400 million securitization backed by cash flows from the trust preferred securities of insurance companies, according to sell-side analysts. The firms are pooling trust preferreds from mid-sized insurance companies. Dubbed I-PRETS III, the deal is the third such collateralized debt obligation backed by insurance trust preferreds. Insurance TruPs have become a popular source of funding for CDOs and are being increasingly used because of their underlying stability, according to Sajjad Hussain, a director at Fitch Ratings. No CDO backed by TruPs has ever been downgraded, even though insurance companies are allowed to defer payments on TruPs for up to five years. Hussain adds that Fitch treats a deferral as a default, adding to the asset class' performance. Seth Hearne, a director at FTN in Memphis, Tenn., and KBW officials did not return calls by press time.
Firms Prep CDO Of Mid-Sized Insurers