The collateralized debt obligation market continued to push ahead last week, with announcements of several investment grade average asset CDOs, as well as ABS CDOs, competing for investor attention.

Aiming for the tightest, unwrapped investment grade print of the year, Pacific Investment Management Co.'s $305 million Balboa is being talked at 42-45 basis points over Libor. Lehman Brothers is lead manager.

Not without reason, PIMCO is marketing itself as an upper-upper tier issuer. While investment grade collateral has been hard to find cheap, PIMCO has been warehousing from early in the year, and is 50%-70% ramped-up, market sources said.

Balboa's target portfolio is 80% IG bonds, 20 high-yield loans, 5% ABS, and 5% synthetic securities. The deal's synthetic bucket can get as large as 20%. Balboa is PIMCO's first investment grade CDO.

Also on the IG front, Morgan Stanley was out with early pre-marketing for the triple-B notes on a $400 million deal for Sun Capital Advisors. Preliminary guidance is Libor plus 225 or Treasuries plus 325-350 basis points, on either floating- or fixed-rate notes, buyside sources said.

It's said that, due to a reverse inquiry, Morgan Stanley is considering structuring a single-A class into the deal.

The target portfolio is 75% investment grade bonds and 25% double-B's, with nothing below double-B-minus. The final legal maturity is 12-years.

Bear Stearns is lined up to underwrite Global Investment Advisors's second foray in to the CDO market late this summer. The synthetic deal will likely be in the $1 billion range.

Although GIA was looking closely at a traditional cashflow investment grade arbitrage deal, similar to its issue earlier this year via Credit Suisse First Boston, GIA settled on a synthetic dynamic pool structure, buyside sources said.

Spreads in the investment grade market continue to contract. However, bankers say credit default swap spreads are tightening as well.

Although GIA's deal is expected to hit the $1 billion mark, 85% of the issue will be an unfunded super-senior credit default swap sold to one of the major monolines.

Bear used a similar structure for Clinton Group's Chambers. The debt classes are likely to be rated triple-A, single-A, triple-B, plus equity.

The structure will likely have about 50 times leveraged with a pool of triple-B/triple-B-plus U.S. industrial bonds supporting the notes (along with an equity tranche), giving the average investment grade rating.

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