Prudential Capital's first collateralized debt obligation composed primarily of leveraged loans is now 85% ramped up and ready to close. According to Siew Chuah, senior analyst at Moody's Investors Service, liabilities have been priced on the bonds, which are underwritten by Salomon Smith Barney and TD Securities. Ross Smead, portfolio manager for Prudential's leveraged bank loan division, declined to comment.
Pricing on the $232.5 million triple-A tranche is LIBOR plus 43 basis points, which is at the tight end of spreads for this year's CLOs. Triple-A spreads on recent deals have contracted to the tightest levels seen this year, reflecting a healthy demand for the notes and the spread compression on the underlying collateral (LMW, 6/17). Interestingly, the triple-A notes for Blackrock Financial Management's Magnetlite IV deal priced last week at LIBOR plus 42 basis points, the tightest pricing seen so far this year.
In addition to leveraged loans, the $327.75 million Prudential vehicle has a small bucket of high-yield bonds. The vehicle, called Dryden Leveraged Loan CDO 2002-II, was executed in response to a favorable funding gap between pricing on liabilities and pricing on loan assets (LMW, 4/14).