Bank of America brought to the European market earlier this month the $546 million Pembridge Square Finance 2006-1, an interesting synthetic CDO referencing a $2.5 billion notional portfolio of both corporate obligations and ABS. KBC Financial Products is managing the deal, which was rated by Moody's Investors Service and Fitch Ratings.
The reference portfolio contains 479 corporate obligations with a weighted average rating of triple B plus to triple B, along with 41 ABS with a weighted average rating of double-A to double-A minus, according to Fitch. Fifty percent of the aggregate notional amount of the portfolio directly references corporate obligations, 35% references corporate obligations through 10 single-tranche credit default swaps and 15% of the portfolio is represented by ABS. The ABS portion of the portfolio could take the form of credit-linked notes, synthetic CDOs or single-name CDS of ABS.
Within the ABS portfolio, 29% consists of subprime RMBS, while 32% is prime and 37% is structured finance CDOs. The larger, corporate portion of the portfolio references a variety of industries, with a 15% concentration in banking and finance, a nine percent concentration in telecommunications.
The A-1 tranche of the deal priced at 45 basis points over three-month Euribor, while the A-2 and B tranches priced at 60 and 75 basis points over, respectively, according to JPMorgan Securities.
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