Operations and issuance for mutual fund industry risk manager Constellation Financial Management are not expected to dramatically change following the announcement that it agreed to be acquired by French investment bank Societe Generale for an undisclosed purchase price. Managing Director Joseph D'Anna is expected to maintain his role and upper management also is expected to be retained.

The new entity, tentatively named SG Constellation, "will continue to serve customers as before, only now we will have the expanded resources of a large financial institution behind us," said D'Anna. "The backing of Soc Gen gives us a balance sheet to work with, as well as a strong financial rating." Soc Gen sports senior unsecured ratings of Aa3' by Moody's Investors Service, AA-' by Standard & Poor's and AA-' by Fitch Ratings.

The news follows the announcement that Constellation has closed a $500 million conduit facility with Soc Gen late last year (see ASR 1/20/03), leading many to believe a deal was in the works. The acquisition is expected to close early in the third quarter.

As for new issuance from SG Constellation, it is unlikely to tap the term market anytime soon, according to D'Anna. "The recent deal from Citibank showed that there is a limited appetite for 12b-1 fee ABS right now," he added. "If the new hedged strictures prove strong in the economic downturn, investor sentiment for 12b-1 fee deals should improve, but the recent [Citibank] print for double-A rated paper at 215 [basis points] over Libor is not attractive to us.

Constellation's prior relationship to Bear Stearns, which has led all of the previous term securitizations off the FEP Receivables Trust, is anticipated to continue unchanged with the obvious exception that Soc Gen will act as lead manager on future term securitizations. "Many of the investors in past transactions have been through Bear's relationships," he added.

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