Despite the dizzying number of theories on the potential impacts on the CDO from the new rules proposed by the Financial Standards Accounting Board, three visible CDOs priced in the eight days since FASB met. The Clinton Group, a New York-based hedge fund, priced two of these deals.
The first, Chambers Street CDO II, is $1 billion notional five-year bullet managed synthetic investment-grade corporate bond-backed CDO via Bear Stearns. The firm also printed a $400 million structured finance/multi-sector CDO, increased from $300 million, via UBS Warburg.
Reflecting a challenging market for investment-grade CDOs, Chambers Street II priced its triple-B cash notes at 365 basis points over three-month Libor, 90 basis points wide of talk. The A-rated piece printed 185 basis points over three month Libor, 35 basis points wide of talk. According to traders, the secondary market is seeing a healthy supply of unhealthy static pool synthetic IG CBOs, primarily from the 2000 to 2001 vintages, from bond holders wanting out of their positions.
On the Clinton SF deal, the triple-A piece, which was wrapped by MBIA, printed at 42 basis points over six-month Libor (A/L 8-years). The unwrapped triple-A priced at 52 basis points over six month Libor (A/L 8-year).
Meanwhile, Salomon Smith Barney underwrote an arbitrage cashflow high-yield bond deal for David L. Babson. XL Capital Assurance (XLCA) wrapped the $243.5 million triple-A tranche that priced at 55 basis points over six-month Libor (shadow rating single-A, A/L 7.7-year).