Several deals made headway in the CDO market last week.
Deutsche Bank continued marketing Zais Group's third CDO of CDOs, called Zais Investment Grade III, to senior tranche conduit investors. The deal is expected to print within the next few weeks.
The deal is expected to have a 17%-18% equity return with a 14.5-year legal final maturity. The average rating is Baa2/Baa3 with a rating factor of 485. The average dollar price on the portfolio is 90 cents.
One investor was put off by the lack of info due to the proprietary nature of Zais' portfolio of mezzanine CDOs.
Also, Independence Fixed Income Associates, a wholly-owned subsidiary of John Hancock Mutual Life Insurance, is readying Independence II, an ABS CDO, via CDO powerhouse Credit Suisse First Boston. The deal is still a few weeks from launch, sources said.
Independence II is an arbitrage cashflow CDO backed by ABS, and expected to have the typical CSFB four-tranche structure. The $291 million, triple-A piece accounts for 70% of the deal, while the preferred shares accounts for 4%.
Independence has closed a handful of prior CDOs, including Declaration Funding.
Also, according to buyside sources, J.P. Morgan Chase is putting together a leveraged loan synthetic CLO for Banc One. The deal references loans to Banc One's corporate clients and is anticipated to involve a new derivation of the MINCS/Sequils structure.
Meanwhile, Lehman Brothers is working with Alliance Capital Management on what might prove to be one of the quarter's most unique deals.
Called New-Alliance Global CDO, 50% of the transaction's preferred shares are being placed with an affiliate of the collateral manager, New-Alliance Asset Management (Asia), which a joint venture between Alliance Capital Management and Sun Hung Kai Properties, buyside sources said. Alliance Capital will act as sub-advisor on the transaction. Financial Security Assurance is wrapping the triple-A senior tranche.
The target portfolio will include 70% senior secured loans, 20% emerging market sovereigns, and 10% high-yield. The assumed recovery rates on the assets are 40% on the sovereign debt and 80% on the senior secured loans. The base collateral management fee is said to be in the low-to-mid double digits per annum on the aggregate sum of the cash, investments, and underlying assets held by the issuer.
Alliance Asset Management (Asia) is the Hong Kong representative of Alliance Capital's Luxembourg-registered family of investment funds and has registered 19 funds with the Securities and Futures Commission
(SFC) for local distribution in Hong Kong.
