J.P. Morgan is planning to refinance a $550 million TCW Group collateralized loan obligation as the bank continues to move deals away from the now-discontinued Chase Secured Loan Trust (CSLT) program into cash-flow structures. CSLT is a synthetic market-value structure whereby noteholders provide credit protection to J.P. Morgan through a total rate of return swap. The bank holds the loans on its book, but first loss investors want to convert to cash-flow structures in order to stabilize their investments, said a source. New notes will be issued to refinance the existing TCW deal, said the source. The name of the existing deal could not be determined.
Last year ING Capital Advisors refinanced the Endurance CLO and Stanfield Capital Partners refinanced the Hamilton CDO. Most recently, General-Re New England Asset Management refinanced KZH-Pondview into a deal called Stonewell (LMW, 2/17). The new TCW deal, called Drawbridge, is a similar transaction to Stonewell and will be launched this month, said the source. A J.P. Morgan official declined comment and a portfolio manager at TCW did not return calls by press time. One portfolio manager explained that the majority of CLOs have a cash-flow rather than market value orientation. The cash-flow deals insulate the investor from market price volatility in the underlying portfolio.