rWhat's an extra half a mill amongst friends? Investors who bought into the Clinton Group's most recent CDO, Mulberry Street II, nearly unseated a PIMCO-backed deal as the largest ABS CDO reportedly to come to market. Weighing in at $700 million in size, Mulberry II was just a couple of grand away from tipping the scale over.

Initially structured at $400 million, Mulberry Street II had been pushed up to $500 million during marketing efforts, according to sources. Yet as closing time neared, lead manager UBS Warburg was able to bulk up Mulberry II to a heft $700 million in size, just half a million dollars less than PIMCO's Pacific Shores CDO Ltd., which closed at $700.5 million last year.

But as to how UBS Warburg managed to attract so many investors to bulk the deal up by three hundred million lies in the deal's structure. Four different types of triple-A tranches were issued by CDO, three of which were wrapped by MBIA.

"Mulberry II was oversubscribed in every tranche," said one market source. "It avoided corporate risks seen in early 2000 vintages as the collateral was focused on investment grade ABS. And it has subordination in all of the classes."

According to market sources, the $195 million A1A wrapped tranche, which carried 35.2% subordination, priced at 47 basis points over the sixth-month Libor. In all, total triple-A tranches accounted for $549.5 million and carried a total of 21.5% subordination. Reportedly $283 million of that was sold with wraps and priced at 55 basis points over the sixth-month Libor; $30 million without a wrap was sold at 70 basis points over the same benchmark.

Another market source noted that while a mere $500,000 may separate the two bulky ABS CDOs, subtracting the equity tranches could paint a more clear picture. Pacific Shores carried $7 million in preferred shares, bringing the deal's tally to $693.5 million while Mulberry II had $28 million in preferred shares, for a new tally of $672 million.

When all is said and done, however, the investor enthusiasm for Mulberry II knocked the gusset out of a market that's been rather dull as of late. One source noted that the drag may be lifting from CDOs, considering the upsizing of Mulberry II and the fact the Abbey list, which had been circulating in the secondary market, is finally exhausted.

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