After closing its third CDO of the year last week, The Winter Group unit Terwin Money Management wrapped up its third CDO last week, an asset-backed transaction that appears to be the hallmark of this two year-old market participant. The firm plans to be a keen participant in the ABS CDO market next year as well.

Glacier II, a $497 million high grade ABS CDO priced in late September, closing the week before last. "It priced very well and we were very happy with the execution," said Simonetta Rainieri, head of Terwin Money Management, TWG's mortgage credit-related asset management business.

Los Angeles-based Terwin Money Management, which has issued over $1 billion in CDO volume this year, is a six-employee shop dedicated to asset management. It plans to ramp up three additional deals next year, totaling issuance between $1.5 billion and $2 billion.

Although Merrill Lynch has served as the sole underwriter for all three of Terwin's CDOs thus far, and it will continue to be a large underwriter for Terwin - leading two of next year's anticipated CDOs - Terwin plans to bring a third via Citigroup Global Markets.

Currently the group maintains a focus on asset-backed CDOs but is keeping the path clear for other opportunities as well. "We look down the road to potentially manage other types of funds as well, like hedge-funds," said Rainieri. "It just depends on the opportunities that will present themselves."

Rainieri, has been in the mortgage business in a variety of capacities since 1982, most recently working at Sun America and subsequently AIG, where she ran one of the largest subordinate portfolios in the country for a number of years. After a brief stint as Countrywide Home Loan's chief credit officer, Rainieri was tapped by TWG and Terwin CEO Rich Winter, to start an asset management business last April.

"I think investors are interested in participating in the U.S. market and this is a way for them to do it in a very diverse manner," Rainieri said.

TWG's deals are structured to mitigate the risk associated with the unpredictability of interest rates, said Rainieri. Since TWG buys investment-grade ABS to package into its deals, the underlying bonds already have credit support below them. "As long as there is a gradual rise of interest rates, I think asset-backed CDO structures are well geared to sustain the downturn that you might see as a result of rising interest rates," said Rainieri.

Attaining collateral with good quality credit is always on the radar screen for TWG. "The challenge towards the end of last year was that the supply of the product became tight," said Rainieri, adding that if there is a significant backup in rates, the mortgage market and issuance slows down, and there is less product available. This year, however, issuance has picked up and spreads have been favorable, added Rainieri.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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