Newcastle Investment Corp., a New York-based subsidiary of hedge fund Fortress Investment Group, is readying a real estate collateralized debt obligation. The $500 million deal, called New Castle CDO II, is jointly led by Bear Stearns and Morgan Stanley. Pricing is set for next week, according to a CDO market participant. Calls to Bear Stearns and Morgan Stanley's CDO trading desks were not returned. Michael Wirth, cfo and treasurer at Newcastle, did not return calls.
The bonds are backed by a pool of assets consisting of 63% commercial mortgage-backed securities, 23% REITs and 14% asset-backed securities.
Indicative pricing on the $413 million triple-A rated tranche is LIBOR plus 60 basis points. The $50 million single-A rated notes are being talked at swaps plus 175 basis points. Indicative price for the $9.2 million triple-B rated notes is 350 basis points over swaps. The remainder for $27.8 million is the 5% equity piece.