Redwood Trust, a residential real estate finance company, has begun marketing a $300 million collateralized debt obligation to structured finance investors, according to CDO market professionals. The multisector CDO, dubbed Acacia CDO II, is expected to be comprised mainly of underlying real-estate asset-backed and mortgaged-backed bonds, according to an individual familiar with it. About 20% of the deal is also backed by high-yield bonds. The transaction is being underwritten by RBS Greenwich Capital. Real estate-backed collateralized debt obligations are one of the brightest spots of the CDO market, as more and more deals are backed with residential or commercial mortgage-backed securities collateral, or a combination of both (BW, 4/7).
Andy Sirkus, head of CDOs at Redwood in Mill Valley, Calif., did not return calls. Neither did Fred Matera, his counterpart at RBS Greenwich Capital.
One outsider said the only apparent sticking point to the deal may be its portion of underlying junk-bond collateral, given managers have found CDOs of high-yield bonds extremely difficult to place lately. This could affect pricing, he said. As a result of the difficult in selling high-yield CDOs, overall CDO issuance is off by roughly 50% compared to last year.