Deutsche Bank and Salomon Smith Barney both hit the collateralized debt obligation market last week, issuing securities with combined proceeds topping the $1 billion mark, said market sources. Neither deal had closed at press time.
Salomon's Coliseum Funding Ltd. was said to be worth $560 million, though that figure is unconfirmed. According to a source familiar with the deal, the CDO, which will be run by Travelers Asset Management, is unique in that it's 70% backed by investment grade assets, a rarity in the CDO market.
"It's what we call the barbell effect," the source said. "It's balancing good performing assets with higher yielding ones."
Additionally, the deal will be 10%-15% backed by senior secured high yield bank loans, 5%-10% by emerging market debt, and up to 5% by other CDO product. Any remaining assets will be high yield bonds, the source said.
Deutsche's CLO, called Blue Stripe 2000-1 Ltd., is structured in five floating rate tranches. A triple-A-rated $147.3 million class-A tranche priced at three-month Libor plus 35. Interestingly, a $66 million class-B tranche, which priced at par at three-month Libor plus 50, was rated AAA by both Fitch IBCA and Standard & Poor's Ratings Services, while only receiving a Aa2 from Moody's Investors Service, said a source familiar with the transaction.
The Blue Stripe transaction also included a $54 million class-C tranche, a $51 million class-D tranche, and a $48.3 million class-E tranche. Further pricing wasn't available. According to market sources, Wachovia Bank, Bank One Corp., and McDonald Investments were also part of the syndicate.
