Heller Financial Asset Management is looking to buy up assets for a new $400 million collateralized debt obligation with slated collateral for the deal comprising roughly 90% leveraged loans and 10% high-yield bonds, said bankers familiar with the deal. The vehicle--West Loop CLO 1--is reportedly structured as a cash flow, arbitrage deal whereby the manager profits from the arbitrage between the spread generated by the sale of notes funding the deal and the spread paid on the assets. Linda Wolf, portfolio manager at Heller, confirmed the manager was in early stages with the CDO, but declined to comment on when it would close or the projected time for issuance of the liabilities. The trustee for the transaction could not be determined by press time. CIBC World Markets will underwrite the notes supporting the deal. A spokesman for CIBC declined to comment.
One banker said the deal has been modeled to have the following tranches and ratings by Moody's Investors Service: a $287 million, Aaa-rated tranche, a $36 million, A3 tranche, a $27 million, Baa2 tranche and a $12 million, Ba2 tranche. An official at Moody's said the ratings agency will not comment on ratings prior to the close of the deal. Heller is expected to retain the $38 million first loss equity piece.