Deutsche Bank Capital is wrapping up Silver Leaf, a collateralized debt obligation backed by private equity funds, according to a CDO market participant. DBC is the New York-based private equity arm of Deutsche Bank, which is underwriting the $463 million alternative asset CDO for pricing next month. The deal is a static structure in which DBC, the collateral manager, is moving a pool of 65 private equity partnerships from its own portfolio off balance sheet. The structure will be rated by all three rating agencies, considered rather unusual for an alternative asset CDO. This may be due to the fact that the static structure is a relatively simple one in which the collateral manager directly provides the funds. Calls to Chuck Flynn, portfolio manager at Deutsche Bank Capital, were not returned. Brian Zeitlin, global head of CDOs at DB, was on vacation and unable to comment.
DBC has already selected the 65 private equity funds backing the notes, the CDO market participant says. Among those funds in the collateral, 56 are leverage buyout firms and nine are venture capital funds, he says. The subordinated tranches are protected by a 40% equity piece. High subordination with a 25-40% equity piece is the norm for alternative asset CDOs because of the need to offset the volatility of the underlying asset, he says.