GoldenTree Asset Management's first collateralized debt obligation, a long-awaited market-value CDO from high-yield guru Steve Tananbaum, should close early this week.
The deal, called GoldenTree High Yield Opportunities I, priced Sept. 29, and was upsized to $700 million from $500 million. Deutsche Bank was placement agent for the equity.
Interestingly, the five-part deal is structured with the senior secured class-A notes at a double-A credit. GoldenTree contemplated a triple-A wrap from Ambac Assurance Corp. on the seniors, although market appetite and a desire for double-A exposure, determined otherwise.
"If the notes had gone out as triple-A, it would have required a wrap," said Fredrick Haddad, who works on bank loans at GoldenTree. "We were able to clear the market with the double-A revolving credit, and fixed-rate notes, so there really wasn't any need to go with the wrap."
The deal consists of the $150 million in double-A-rated class-A notes, along with a $310 million double-A-rated revolving credit, which allows for the 12-month to 18-month ramp up period. The deal includes $33 million in single-A-rated class-B second senior secured notes, $51 million in triple-B-rated class-C senior subordinated secured notes, $23 million in double-B-rated class-D subordinated secured notes, $13 million in single-B-rated class-E junior subordinated secured notes, and $112 million in unrated equity.
The notes, which were rated by Moody's Investors Service, Fitch, and Standard & Poor's Ratings Services, are offered as both fixed- and floating-rate.
Being a market-value CDO, the fund is geared for active trading - as opposed to a buy-and-hold cash flow CDO - and can be filled with just about any asset type, be it high-yield bonds, leveraged loans, equity, mezzanine debt, distressed securities, CDOs, asset-backeds and more.
GoldenTree was formed earlier this year by Tananbaum, who built his reputation at MacKay-Shields Financial. Leon Wagner, former co-head of junk bond sales at CIBC World Markets, joined as a partner soon after.
"Given the background and experience of the people involved, [the deal] should be extremely successful," Haddad said. "We're at a point in time right now when assets are pretty cheap. And we don't have baggage to bring with us from older deals, so we can focus all our attention on capturing the value in today's market."
Haddad moved over from Royal Bank of Canada, and has been with GoldenTree since Septemer. Before RBC, Haddad was at Credit Lyonnais.
Additionally, Tom Shandell and Steven Shapiro joined GoldenTree from Bear Stearns and CIBC, respectively. Laura Rotter came over from King Street Capital Management, while Joshua Press, who joined as a trader, came over from First Dominion Capital.
Though GoldenTree is a startup shop, rating agencies were comfortable with the team's experience, said Fitch's Kathy Moon, who rated the deal.
"The criteria that we require of an asset manager to be able manage a market value deal is much more stringent than with a cash flow deal," she said.