UBS Warburg is marketing a $1 billion resecuritization of outstanding collateralized debt obligations that is expected to be priced at some point after Labor Day, according to investors and sell-side analysts. They say the bank is trying to gather investors for the transaction, which will pool senior tranches of CDOs to create a CDO squared. One market participant said this is somewhat unusual, since most CDO squareds tend to bring together higher-yielding mezzanine tranches to clip the higher coupons offered on junior tranches. But these deals also tend to be smaller, he adds, because there tend to be fewer outstanding mezzanine pieces and they tend to be smaller than senior tranches. The UBS deal will use triple-A and double-A assets. Another official adds that given the International Swaps and Derivatives Association has not issued definitions governing default swaps on structured securities, the synthetic transaction will have to draw up its own definitions, although the market is becoming more uniform in governing CDOs backed by reference pools of ABS and CDOs.
Jeff Herlyn, co-head of CDO banking, was on vacation last week and Mike Rosenberg, also co-head, was traveling abroad and did not return a call by press time.