With six CDOs under its belt and the team complete, RBS Greenwich Capital is looking to grow into a powerhouse in the sector in 2004. Although the focus of the RBS Greenwich team will remain in its historical areas of expertise — real estate and structured finance — Managing Director Fred Matera said RBS "is not limited to any one sector and we are always looking for arbitrage in other collateral."
RBS Greenwich's first-ever lead role on a CDO was on behalf of REIT Redwood Trust, a $285 million deal backed by MBS collateral, named Acacia CDO 1. Redwood has since priced two additional real estate CDOs, the most recent last October, all via RBS Greenwich as lead manager.
To close 2003, RBS Greenwich had led $590 million of CDOs, ranking 16th in the league tables, according to Thomson Financial.
The RBS Greenwich CDO group has grown along with the CDO market, after having poached Matera from Credit Suisse First Boston in May 2001 (see ASR 5/14/01), and steadily building its group since. Prior to CSFB, Matera had headed the CDO group at Donaldson, Lufkin & Jenrette, which was acquired by CSFB. The team currently consists of five pros involved in the origination, structuring and trading of the CDO product.
ABS strategist, managing director Peter DiMartino, heads the research effort.
The team is finalized just when the CDO market is showing signs of maturation, having survived the credit downturn and lagging economy, and emerged with increased liquidity in secondary markets. As the economy improves, so should CDOs. "The CDO market should continue to be insensitive to the direction of rates,” said Matera. "Higher rates would reflect a stronger employment environment, which would have obvious benefits to credit. The secondary market should continue to evolve with more transparency and marginally more liquidity."
Without naming specific planned transactions, Matera claims RBS Greenwich's pipeline has grown, and more lead mandates are expected in 2004. Going forward, Matera recommends the early part of 2004 as the best time for investors to buy CDO product, as CDO spreads have typically lagged corporate credit performance. "Spreads on CDO liabilities should start to catch up and begin to grind in," Matera added.
Also, CDO equity investors should seek stakes in transactions that began ramping up last year before CDO spreads began tightening to take advantage of the general market rebound.