Four Corners Capital Management, the asset management company headed by loan veteran Michael McAdams, has been forced to put its debut collateralized loan obligation Mondrian CDO I on the backburner after failing to raise the debt for the vehicle. The event is surprising to many loan players as McAdams, president and chief investment officer of Four Corners, is considered to be an institution in the loan market and other firms have been raising debt successfully in the last few weeks. Four Corners is staffed primarily with ex-ING Capital Advisors people, with most individuals having been involved in at least 14 deals. McAdams did not return repeated calls for comment.
A banker said the $400 million deal is being put on hold until after the new year, with financial partner Macquarie Holdings potentially stepping up to provide equity--which was also a problem--going forward. Four Corners is currently attempting to sell some of the warehoused assets at par in the secondary market, said a banker. McAdams had previously said the plan was to sell the notes in October after a lengthy period in the pipeline. "We started warehousing in March, and we expect to price in the next 10 days," McAdams told Loan Market Week (LMW, 10/20). Four Corners had purchased about $150 million in assets for the vehicle while CIBC World Markets is the underwriter. Calls to CIBC officials were also not returned.
One CDO analyst said that a number of deals are not getting done, while a rival portfolio manager expressed sympathy. "There have been a lot of downgrades that have unnerved investors," the buysider said. "It's harder to market the lower-rated tranches and though these large institutions have a lot of money, high yield has been underperforming for years. Now is probably the best time to enter, but these structures are becoming harder to sell," he added. One factor that has made the senior tranches tough, meanwhile, has been competition from investment grade bond issuance. "GE bonds went 100 basis points above the curve," the manager said. "An investor can get these AAA assets, or a LIBOR plus 45 illiquid asset," he noted. "They need to be diversified, but which one are they going to buy?" he asked.