Katonah Capital is in the final stages of wrapping up a $425 million collateralized debt obligation named Katonah II Ltd. According to a source close to the deal, Katonah is in its final investing phase, looking at a variety of sectors, after it priced the notes for the vehicle in the beginning of March. The CDO is a traditional cash-flow arbitrage structure with an 85% investment in loans and a 15% investment in high-yield debt. Final close on the vehicle is expected in late July. Chase Manhattan Bank is trustee and Kohlberg & Co. is the majority equity investor. Officials at Katonah Capital declined to comment.
Bear Stearns underwrote six tranches of notes for the vehicle with ratings fromMoody's Investors Service ranging from Aaa to Ba3. The Aaa trache was reportedly priced at LIBOR plus 49 basis points, the Baa3 tranche at LIBOR plus 240 basis points, and the Ba3 tranche is priced at LIBOR plus 625 basis points.
This vehicle will be Katonah's second CDO to date, following another $425 million structure it managed that closed in May 2000 with Chase Bank of Texas acting as trustee. The vehicle was supported by three tranches of floating rate notes issued through CIBC World Markets.