Citigroup is preparing to close a $1.5 billion hybrid CDO called Tallships Funding 2006-1. The transaction references primarily subordinate subprime mortgages, along with a hefty bucket of structured finance CDOs. Bear Stearns Asset Management will manage the portfolio. The deal is expected to have an initial $938 billion unfunded super senior swap and a $250 million revolver. It will issue roughly $589 million of funded and income notes. Bear will manage a $1.5 billion portfolio containing 62% credit default swaps referencing RMBS and 38% cash and CDO securities. The pool has a 30% bucket for CDO assets, a relatively sizable chunk of the portfolio compared to similar deals.