ZAIS Group LLC will to take over a $300 million collateralized debt obligation from Triton Partners LLC next month, after investors voted to sack Triton from the deal because its managers left the firm, according to several individuals involved in the transaction. The case appears to mark the first time a CDO manager has been replaced for personnel reasons in a deal that did not have a so-called "key man clause," and is only one of the roughly dozen or so CDO deals that have ever switched managers.
Denise Crowley, senior portfolio manager at ZAIS in Red Bank, N.J., confirmed the collateral manager will take over Triton's Opportunities CDO next month and plans to rename it Galleria II. Simon Mikhailovich, managing partner at Triton, declined to comment.
Investors yanked the Triton Opportunities Fund I, a CDO of CDOs that closed in October of 2001, after veteran managers Arturo Cifuentes and Jonathan Polansky left Triton in January. Their departures were preceded by that of Daniel Arbess, a Triton partner, who quit last autumn. Although he was not involved in the day-to-day operations of the CDO, one person involved in the deal said Arbess' departure was seen as a bad sign. "Investors bought into the deal on the basis of three guys running the deal, and all of a sudden these guys are gone," he said. Two-thirds of investors in each class of the CDO needed to approve a managerial change--which they did. In fact, the voting "was never in doubt," said one official.
Outsiders said the move is a blow to Triton, which was earning roughly $1.5 million a year in senior and subordinate fees by managing the Opportunities CDO. Although the CDO was only one of five that Triton manages, observers said the Opportunities CDO was generating the most revenue because its four other CDOs, which are all high-yield ones, have not performed well and did not generate subordinate management fees last year. In fact, this is said to have stretched the firm's resources and played a role in the departures of Cifuentes and Polansky. One observer said Triton is unlikely to sell itself as a collateral manager in any new CDO it might try to bring.
Reached at his home in White Plains, N.Y, Cifuentes acknowledged his departure helped bring about the change of collateral managers. He declined further comment. Polansky could not be reached. Neither has taken structured finance roles elsewhere yet.
The deal was underwritten by Morgan Stanley and T.D. Securities. Kevin Benson, v.p. in structuring at Morgan Stanley, declined to comment. Sebastiano Riva, his counterpart at TD, did not return calls.