Cohen Brothers Financial subsidiary Strategos Capital Management is gearing up to manage its first mezzanine structured-finance CDO. The $601.6 million Preferred Funding I is expected to come to market late next month via Merrill Lynch. The deal will be backed almost entirely by residential mortgage-backed securities and will have up to a 40% bucket for synthetic securities.
RMBS will back all but 7% of the deal - and nearly half of that, 48%, will consist of subprime collateral. The transaction has up to a 10% bucket for CDOs. The minimum rating for all the collateral backing the deal will be double-B minus, according to a Fitch Ratings presale report issued last week. Approximately 47% of the collateral is expected to hold an A-plus rating. Conversely, 18.6% of the collateral is expected to maintain a triple-B minus rating.