Independence Investments, a buy-side subsidiary of John Hancock Financial Associates with more than $18 billion under management, is structuring a roughly $400 million collateralized debt obligation of underlying asset-backed paper, according to market sources. The transaction is being marketed by underwriter Credit Suisse First Boston. The collateral for the deal, Independence IV, is expected to be a mix of cashflow securitizations. One outsider notes Independence's arbitrage-driven ambitions come at an interesting time, as ABS spreads appear quite rich and this would reduce the basis for the collateral manager. However, he says there is still room to structure the deal profitably. Furthermore, one sell-sider notes that downgrades for structured finance CDOs have gone up this year.
An official at Independence, located in McLean, Va., referred questions to Michael Stern, principal and head of structured finance. He did not return a call by press time. Tom Pascale, managing director and acting head of U.S. structured credit products at CSFB, declined to comment.