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.
The Strategos CDO will boost total CDO assets under management by the team - led by lead portfolio manager Alex Cigolle -to $2.6 billion. The deal will be the third CDO managed by the five-person team, which was formed to run Cohen's structured finance investment management activities.
The team, which is anticipated to grow, so far includes two traders and two credit analysts who all report to Cigolle. Strategos's previous two CDOs were both high-grade deals - Kleros Preferred Funding I, which closed in June of last year, and Kleros Preferred Funding II, which closed in early January.
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