The Federal Reserve Bank of New York set a Thursday deadline for all bids on the MAX CDO holdings of its Maiden Lane III portfolio.
After announcing its change in investment objective at the beginning of April for the Maiden Lane III portfolio, the Fed last Wednesday said that it had asked eight dealers to bid on $7.5 billion of assets from the portfolio. The deadline for bid submissions is on April 26.
The “all-or-nothing” bids, which are to be submitted by 10am this Thursday, must be good for at least three hours, according to this week's Bank of America Merrill Lynch report. The winning bidder will be notified of the next highest bid (the cover), and the cover bid will be notified that they were the cover bid.
In separate reports, Bloomberg reported that Merrill Lynch and Morgan Stanley teamed up to bid on the ML III holdings and distributed price estimates today. Yesterday the news service reported that Citigroup, Credit Suisse, and Goldman Sachs are also submitting a joint bid.
The strong broker dealer participation has allayed some of the earlier concerns that the market might not be ready to absorb the extra supply of legacy CMBS paper. When the Fed made its announcement at the beginning of the month, market reports indicated that spreads on both primary and secondary CMBS paper had widened on the back of the new.
The Fed solicited bids from eight dealers that include Barclays Capital, Citigroup Global Markets, Credit Suisse, Deutsche Bank Securities, Goldman Sachs, Merrill Lynch, Morgan Stanley and Nomura Securities.
FTN Financial analysts wrote in a report today that the 2007 vintage will be the most well represented within the MAX CDO holdings with over 70% of the assets issued in 2007.
In terms of tranche type, AJ tranches make up the largest portion, representing about 45% of the assets being auctioned.
FTN analysts said that the recent low supply of AJ trades means that "the auction results should provide market participants with some valuable insights for this subsector of CMBS."