Finishing off the week was a pack of CDO issuers looking to print deals by the half-year mark.
On Wednesday Strong Capital Management priced Forte II, a $300 million arbitrage cashflow high-yield CBO via Merrill Lynch, at a tight 42 basis points over Libor on an unwrapped basis. Forte II, Strong's second high-yield CBO this year, is the tightest high-yield CBO pricing year-to-date. As of June 22, YTD global CDO issuance stood at $37,523 billion, 73% of which were arbitrage and 27% balance sheet deals, according to Douglas Lucas, the director of CDO research at JPMorgan.
As of press time, CSFB had two CDOs slated to price by Friday. An investment grade average CDO called Clearwater for Atlantic Asset Management, which was looking to price the triple-As at 40 to 42 basis points over Libor, and an ABS CDO for John Hancock's Independence Fixed Income Associates talking its triple-A bonds at 47 to 48 over three month Libor. Goldman Sachs' had a $400 million US high-yield CBO for South Africa's Rand Merchant Bank with an Ambac wrap on the triple-A's talked at +45 over the three-month Libor. Bank of America had a $375 million ABS/RMBS CDO for Beacon Hill talked at +48-49 basis points over three-month Libor in the market, which was set to price by last Friday.
Robeco CDO II, a high-yield CBO 85% (bonds) managed by Weiss Peck & Greer with Rabobank International as a sub-advisor on the loans portion of the deal, was talked at 43 to 45 basis points over the six-month Libor at press time. Market sources said Rabobank is retaining 49.9% of the equity in the trade.
Scheduled for early-to-mid July, Morgan Stanley has Triton Partners's fifth CDO of CDOs, which has the $37million the single-A class talked at 135 basis points over six-month Libor or 235-250 basis points over Treasurys, buyside sources noted. Triton V is 90% backed by mezzanine CDOs holdings. The deal has an average rating factor 550 (average rating of Baa3). The five-year reinvestment period is extendible to seven years.
Meanwhile, on the other side of the Altantic, bankers say that "tailor made CDOs" or multi-asset CDOs are becoming a common pitch to clients. This means structuring the CDO around the clients portfolio and what risk they want to shed. For example, we hear DBAB is pitching European institutions that have large convertible bond portfolios to put into CDOs.