Morgan Stanley and RFC Securities underwrote a unique revolving CDO structure, Capital Trust RE CDO 2004-1, managed by GMAC Commercial Holding Capital Markets Corp. Priced in May, the $370 million deal was backed by previously issued B-piece and mezzanine tranches of CMBS retained or purchased by GMAC Commercial Mortgage.

The $100 million A1 tranche, rated triple-A by all three rating agencies, with a 4.27-year average life, priced at 33 basis points over three-month Libor, and its $79.92 million A2 tranche, also rated triple-A with a 4.8-year average life, priced at 45 basis points over Libor. The double-A rated B-tranche, with a 5.07-year average life, priced at 75 basis points over Libor, wider than initial price guidance in the 60 basis point area over.

In an interesting twist, GMAC Commercial Mortgage will be able to rotate collateral in and out of the trust, allowing it to retain or purchase subordinated CMBS classes it issues and re-issue bonds from the Capital Trust as needed. The transaction was sold directly into a conduit facility, thereby acting as a quasi line of credit for GMAC Commercial Mortgage. Collateral was a diverse pool of B-tranche CMBS backed by a diverse array of sectors.

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