Bear Stearns, Citigroup and Credit Suisse First Boston are among the dealers marketing collateralized debt obligations of bank or insurance trust preferred shares, according to several CDO market participants. This comes as Sandler O'Neill & Partners and First Tennessee Capital Markets, regional banks that have led the way in trust preferred CDOs, also are in the market with such CDOs. Sandler has teamed up with Merrill Lynch (BW, 9/8). Bear Stearns is shopping Tropic CDO I, a $333 million deal that pools bank trust preferreds, while Citigroup is marketing a CDO of insurance collateral and CSFB is talking about a roughly $350 repackaging of bank collateral, according to rival sell-siders. Officials working on the deals either declined to comment or did not return calls.
In total, five CDOs of bank and insurance trust preferred collateral are being actively marketed right now and should close in the coming months, according to Sajjad Hussain, a director at Fitch Ratings, while more will being the marketing phase soon. He says that these deals have all started marketing around the same time is more of a coincidence than anything, and indicates that large banks are moving into the trust preferred arena (BW, 5/19). And despite the full pipeline, he expects the deals to find enough investor demand, given the asset class is becoming a bit more seasoned and has yet to experience a single downgrade.