A high yield CLO takes the prize for being the first visible U.S. CDO issuance to price in 2004. Sources report Light Point I, a $409 million arbitrage cash flow vehicle, priced in line with spread talk last week.

Underwritten by Links Securities, the leverage loan-backed vehicle marks a first-time issue for manager LightPoint Capital. The following tranches priced against the three-month Libor: a 6.1-year $208 million triple-A class A-1 priced at 50 over; a 7.5-year $22 million triple-A class A-2 priced at 88 over; a 7.9-year $26 million double-A class B priced at 100 over; an 8.25-year, $8.5 million single-A class C priced at 175 over; an 8.25-year, $8.5 million triple-B class D priced at 300 over; and an 8.60-year, $11 million double-B class E priced at 750 over. A 4.10-year $22 million single-A class X priced over swaps with a 5.25% coupon.

Sources report that Banc One Capital Markets is in the presale stages for its first lead- managed CDO. Alexander Park CDO I is comprised of a pool of about $300 million of RMBS, HELs, CMBS and ABS. The CDO is also the first cash flow arbitrage CDO brought to the market by Princeton, N.J.-based collateral manager Princeton Advisory Group. The co-underwriter of the deal is SG Cowen.

The reinvestment and the non-call period for Alexander is four years, with a 180-day ramp-up. All of the collateral at purchase must have a rating of at least BBB-', according to the presale report. However, with more than 80% of the collateral in the RMBS and HEL area, the bond is subject to prepayment risk. Though all liabilities will be floating rate, its fixed-rate assets may account for up to 35% of the collateral, which Alexander will mitigate through a hedge and an interest-rate cap.

In the meantime, market issuance is light, and sources anticipate it to be soft in the coming weeks with dealers replenishing their calendars and two securitization conferences drawing many firms to Arizona. However, one source noted robust demand is expected in the secondary market with investors showing strong interest in mezzanine triple-A and double-A notes.

On a separate note, Deutsche Bank last week came out with its CDO tally for 2003, reporting that global CDO issuance reached $94 billion in 2003, a 14% jump compared with 2002. Much of that growth stemmed from the European market, with euro-denominated issuance comprising 35% of the total CDO volume. Domestic issuance actually fell, by Deutsche's numbers, dropping 5% from 2002 to $47 billion.

Clarifying those figures, Managing Director Anthony Thompson, head of U.S. ABS and CDO securitization research, noted that 40% of the year's issuance came from the structured product sector, with ABS and CMBS bonds making up the bulk of underlying collateral. Leveraged loans remained the sole steady contributor to issuance and spreads for all CDO products widened, Thompson noted in the report.

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