Morgan Stanley placed a $1.58 billion static cashflow investment-grade CBO last Wednesday for GE Asset Management. The super-senior, four-year unwrapped triple-As came in at a tight 42 basis points over one-month Libor.

The use of super senior triple-A tranches allowed GE to get a cheaper cost of funding, sources said. The structure, which provides extra subordination for the triple-As, is becoming popular this fall, perhaps an indication of the difficulty of selling triple-A notes without a wrap. Also, as dealers continue to merge their derivatives and CDO groups, expertise in super senior structuring is becoming readily available, commented a banker with a super senior cashflow CDO in the market.

The transaction, called Cardinal CBO, was backed by a triple-B weighted average pool of non-U.S. domiciled, U.S. dollar denominated corporate bonds. Most of the bonds are understood to be from Western European issuers. GE retained the $260 million of first loss securities in the deal. The triple-A GE name is said to have been helpful in the deal's marketing, despite this being the servicer's first CBO. Investors in the second triple-A tranche had the option to buy the bonds with an Ambac wrap outside the deal documentation at 43 over six-month Libor, in from 45 talk. It's heard that $155 million of the 8.4-year class was sold in the secondary market with the Ambac wrap. The unwrapped portion priced at par at 80 over six-months Libor, widening from 70 over Libor price talk.

According to Credit Suisse First Boston's CDO Market Watch Weekly, the average spread for triple-A cashflow IG CBO's is 53 over six-month Libor.

At press time, Pacific Investment Management Co. was looking at a potential print for its $300 million arbitrage cashflow IG CBO via Lehman Brothers. Lehman is known for bringing some of the tighter prints in the market. The deal is called Santa Rosa, and is using a traditional structure. The 8.4-year triple-As are talked at 50 over six-month Libor.

In July Phoenix Investment Council priced a $1.0 billion CDO. The hybrid cash/synthetic IG CBO was brought by UBS Warburg. Mistic 2002-1 CBO cleared its eight-year triple-As at 43 over six-month Libor with an MBIA wrap. No issuers or underwriters could be reached for comment.

Separately, one seasoned investor noted that Gleacher CBO 2000-1 senior notes - rated Aaa' by Moody's Investors Service - have value in the 300 over six-month Libor area discount margin. The bonds have been seen offered in the 250 range earlier this month. Underwriter Goldman Sachs was last seen marking the senior notes at a 150 over six-month Libor. The initial coupon of the 4.69-year, $95 million class was 43 over six-month Libor.

Despite the Gleacher & Co. having a mandate for several CBOs and equity money behind it, the firm stopped at one deal once the high yield market moved away from it. The manager is said to have had stable staffing and decent decision making in a tough market.

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