Starbird Funding Corp., an ABCP conduit sponsored by BNP Paribas, financed $900 million of the $1 billion Camber I ABS-backed CDO that priced on Jan. 31, according to market sources.
BNP Paribas is underwriter on Camber I, with collateral manager Cambridge Place Investment Management. BNP's Starbird purchased two triple-A $450 million classes that priced at 26 over three-month Libor. It's understood that the $450 million A-2 class was wrapped in the conduit, though this could not be confirmed.
Camber is part of a growing class of "high-grade" SF CDOs, backed exclusively by triple-A rated ABS, with other limitations therein, including the exclusion of CDOs and some of the more volatile sectors of ABS, such as aircraft, manufactured housing, whole business and mutual fund fees (unless the bonds are insured).
In addition to the $900 million notes placed with Starbird, Camber I issued a euro-denominated A-3 class worth 65 million, plus two sub classes: a $10 million, double-A B-class that priced at 117 over three-month Libor, and a $9.5 million single-A C-class that priced at 200 over three-month Libor. The preferred shares make up just less than 5% of the deal.
The trend of funding parts of new-issue CDOs in the short-term market, either for temporary warehousing or for term, has manifested itself in other ways as well.
Last year, many new deals were structured with a senior class that issues ABCP-like paper, with backstop liquidity and other features common to the ABCP vehicles. This was seen in the recent Millstone Funding, a SF CDO underwritten by Citigroup Global Markets; it featured an $880 million money market tranche (94% of the deal) able to issue CP below Libor.
As for Starbird, some market participants, on both the ABCP and CDO sides, viewed the addition of $900 million in a single CDO as a unique development. All told though, the uniqueness of the CDO probably facilitated this sort of transaction, as the conduit is taking on nothing riskier than the underlying portfolio of triple-A ABS, which is already diversified and stressed to meet the criteria for the Camber CDO, a source explained. (Some might even argue Starbird is taking on less risk than if it directly funded the underlying portfolio, since Camber's risk is tranched out.)
Officials at BNP Paribas declined to comment.
According to a write-up from Moody's Investors Service on Starbird, the $900 million addition of senior notes (Moody's does not name the CDO) benefits from a liquidity facility that will fund ABCP as long as the CDO is rated above Caa1.' Starbird will cease issuing new ABCP if the CDO tranches fall below Aa3.'
Starbird is authorized to issue up to $5.1 billion in ABCP.