Ellington Capital Management is prepping a roughly $400 million multisector structured financed collateralized debt obligation that is expected to be comprised predominantly of residential mortgage-backed securities, according to outside CDO professionals. Ellington will be the collateral manager for the deal. The transaction, Duke Funding V, will be Ellington's fifth structured finance CDO.Olivier Cojot-Goldberg, portfolio manager at the Old Greenwich, Conn.,-based fixed-income arbitrage hedge fund and the person responsible for the CDO, declined to comment.
Marketing for the mezzanine tranches of the CDO began last week, according to individuals close to the deal; marketing on the triple-A-rated senior tranches has not yet begun. Roughly 90-95% of the underlying collateral will be made up of RMBS paper.Morgan Stanley, which has not been involved in Ellington's previous CDOs, is acting as underwriter for the deal.
Credit Suisse First Boston had sold the two previous deals, Duke Funding III and IV, and outsiders said the nod to Morgan Stanley appears to be an attempt on Ellington's part to diversify its distribution in an increasingly saturated CDO market. The preparations come as multisector CDOs backed by underlying real estate collateral have captured the bulk of structured finance CDO issuance, at 59% of new deals this year (BW, 4/7).