Tricadia Capital is shopping the notes on a $250 million collateralized debt obligation that will be backed by mezzanine tranches of outstanding CDOs, and feature triple-A rated mezzanine tranches. Tricadia is an asset manager formed earlier this year. It is owned by Mariner Capital, a fund of funds bond investor with $2.5 billion under management.
Michael Barnes, partner in New York, says the CDO squared will feature a triple-A rated mezzanine tranche, as well as a triple-A rated senior tranche to offer potential investors more yield while still maintaining quality. He adds Tricadia has already acquired about a third of the underlying debt, which will be a mix of bond, loan and asset-backed CDOs. Most of the underlyings will be cash-funded deals, although the CDO's structure permits it to buy some synthetics, he adds. Bear Stearns is underwriting the deal. Marketing commenced earlier this month; pricing is expected in September.
Looking ahead, Barnes says Tricadia will acquire collateral mainly through the primary market, because he thinks it offers deals that have cleaner structures, gives investors greater input and are run by better, more-experienced managers. "We feel very strongly that we understand better what we buy in the new issue market; we also feel that with the whole world running after distressed CDOs in the second market, they are bid to a point where we don't find them attractive anymore," he notes.