Morgan Stanley priced Deerfield Capital Management's latest CDO last Tuesday, a $1 billion notional, arbitrage managed synthetic IG CBO called Palmetto Synthetic CDO Ltd. The triple-A notes on the five-year bullet priced at talk, 60 basis points over three-month Libor. Each class appears to have cleared within guidance, except for the often-challenging Aa2'/AA' (MDY/S&P) tranche that priced at 100 basis points over three-month Libor, versus initial guidance of 85 basis points over three-month Libor.
The pool of IG corporates will have a Baa1'/Baa2' average rating and a 1.5% issuer concentration limit on A3' and above credits.
On May 22, Moody's put Deerfield's Valeo II arbitrage cashflow IG CDO Aa2' and the Baa2' floating and fixed tranches on watch for downgrade due to credit deterioration on the underlying portfolio.
Deerfield (formerly Springfield Asset Management) is based in Chicago and has a staff of over 25 professionals focused solely on CDOs. The company manages assets in excess of $3.65 billion across various asset classes, including more than $3.0 billion in CDOs. The issuer and syndicate could not be reached for comment.