CDOs/CLOs

Citigroup has sold a $1 billion CLO for Guggenheim Investment Management, according to a source familiar with the situation.

The $2.2 billion term loan backing Kinetic Concepts' buyout was probably not the best test case for using shorter dated loans to appeal to maturing close, a banker involved with the transaction said today.

The list of banks suing MBIA just got smaller. Wells Fargo Bank, formerly Wachovia Bank, pulled out of three lawsuits against the insurer that challenged the New York State Insurance Department’s approval of the restructuring of MBIA Insurance Corp. into two entities.

Europe might be feeling great uncertainty over how to resolve its sovereign debt crisis, but its securitization market has still managed to restart.

Because of still challenging market-making conditions, Credit Suisse Group is set to either downsize or cut altogether some securitization businesses and fixed-income units.

Citigroup has completed pricing on the latest CLO to hit the market, raising a $408.7 million fund to be managed by WCAS Fraser Sullivan Investment Management, according to a source familiar with the transaction.

Securitization pros have had to constantly come up with new deal structures to respond to challenges posed by the ongoing financial crisis.

With so much CLO investment capacity going offline over the next few years, the loan market is getting creative in structuring deals to accommodate this waning investor class.

Many investors in CDOs and similar products were taken by surprise when a U.S. bankruptcy court declined to dismiss an involuntary chapter 11 case filed against CDO-squared issuer Zais Investment Grade Ltd. VII (a.k.a. ZING VII). A test of the so-called bankruptcy-remoteness of offshore issuers was perhaps inevitable given the volume of distressed CDO securities in the market today. From a pure bankruptcy law perspective, the court's decision is not revolutionary; it simply confirms the reality that entities can still wind up in bankruptcy even if they were structured to avoid it. But for investors in the lower tranches of distressed CDOs hoping to see values rebound over time, the ZING VII bankruptcy makes the prospect of future "tranche warfare" in chapter 11 seem inevitable. It remains to be seen whether the dismissal will be affirmed on appeal, whether ZING VII's senior noteholders will succeed in confirming their chapter 11 plan, and most importantly, whether ZING VII is merely the first of many CDO bankruptcy cases to come. Regardless of ZING VII's ultimate outcome, the bankruptcy court's analysis in denying the motion to dismiss should be considered carefully as market participants structure, sell or buy into future CDOs.

MF Global filed for Chapter 11 protection today, less than a week after being downgraded to junk status.