Since the story was written sources said that 13 members of the SunTrust CDO team have left the company for another opportunity.
SunTrust Robinson Humphrey is a company that wears various hats in structured products - an investor, investment bank and asset manager. It is currently embarking on growing its business by hiring aggressively throughout the first half of the year and increasing its volume in its various businesses, officials from the company said.
"We expect to double our revenue in the next three years," John Giegerich, managing director and head of asset securitization at the firm, said.
One of the areas that SunTrust is planning to bulk up its asset securitization platform in is the CDO arena. Just last December, SunTrust was an asset manager for its first ABS CDO, Ansley Park Asset Management that came to market with a $600 million mid-grade transaction backed by a portfolio of loans with a weighted average rating of single-A. According to officials from the firm, this is a new structure between high grade and mezzanine transactions, one that is finding several emulators as six more deals with the same structure are currently in the pipeline from competitors. SunTrust launched its CDO, along with its CMBS and RMBS businesses, in the past two years.
SunTrust is both an underwriter and asset manager to its deals, although separate teams handle these two components of the business. Aside from Ansley Park, SunTrust also is an asset manager for Baker Street Asset Management. The firm has come to market with two traditional leveraged loan CLOs and has $1 billion under management for its CLO business
For 2007, Giegerich said that they are expecting "a full ramp-up and in all likelihood we would have considerably more assets under management as we expect to substantially grow."
He said that SunTrust's edge as a CDO asset manager is that it had started as an investor buying CDO collateral, and has emulated the best practices of the most successful asset managers. "We don't aspire to be all things to all people," Giegerich said. "We are here to make sure that we originate, structure and distribute transactions that would stand the test of time. We are looking beyond the yield and are putting in solid effort to know that we are aware of the risk that we are taking and that we are asking our investors to take." SunTrust typically takes up to a 20% position in each transaction it does.
This outlook is reflected in the way the firm views subprime RMBS securities, which are currently a very small portion of the collateral that is backing the Ansley Park CDO deal. "In terms of our subprime RMBS purchases, we do not buy them as whole loans," Giegerich said, adding that SunTrust exercises the proper due diligence by doing onsite evaluations of all originators and servicers that it buys these loans from. SunTrust only buys "the upper sliver of subprime".
Giegerich also said that they are looking at providing cutting edge technology to the CDO space by bringing innovative deals - such as the mid-grade Ansley CDO issued in December - to market.
Aside from its CDO business, SunTrust also has an established presence in the RMBS and CMBS arenas. Although the growth in its residential mortgage-backed business is not as big right now because of the "not as attractive" arbitrage available, SunTrust has experienced a significant expansion in its CMBS business, with $1 billion originated in 2006 and origination north of $1.5 expected this year.
In terms of its distribution, SunTrust reaches investors through three primary channels, said Michael Wheeler, managing director and head of fixed income sales, trading and syndicate at the firm. These channels include its traditional distribution to regional investors, sales to its corporate and commercial clients for cash management and the recent addition of a focused institutional investor coverage team. A fourth channel that Wheeler mentioned is SunTrust's wealth and investment management line of business that serves retail investors, including high net worth individuals. This fourth channel continues to grow in overall importance in a variety of capital markets products including, on a selected basis, preference shares of CLOs.
SunTrust is expecting to add 50 or more hires to its current roster of 70 professionals covering its various businesses that include ABCP and Trust Preferreds as well. According to Giegerich, the bulk of the hires - which are going to range from analysts to managing directors - are going to be done in the first half of the year.
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