Wachovia Securities is reportedly canvassing potential investors in a bid to raise up to $300 million to market a collateralized debt obligation of CDOs, say rival CDO sell-siders. Wachovia will use the proceeds to buy senior tranches of outstanding high-yield bonds and leveraged loans CDOs. Outside market professionals say the transaction, known as a repackaging or CDO2, is likely being done for both arbitrage purposes and for balance sheet reasons, since the bank has been one of the more active underwriters of CDOs and could be seeking to shed some risk it may have retained on those deals. The transaction's moniker is Gresham Street Funding CDO.
Given that the proceeds will be used to buy a static pool of highly rated assets, there is no collateral manager on the deal. One outsider notes this makes it somewhat different than most contemporary CDOs, which pool together actively managed assets selected by an experienced buy-sider. Russ Andrews, managing director and head of the structured products syndicate desk in Charlotte, declined to comment.