Merrill Lynch brought to market late last month what is being classified as the first tax exempt CDO. The deal, arranged as a structured tax-exempt passthrough, consists of $418.5 million of senior, mezzanine, subordinate and junior certificates maturing August 2037. The transaction is backed by a portfolio of not-for-profit and other types of tax exempt middle-market corporations. Cohen Municipal Management, a division of Cohen Brothers Financial Management, will manage the deal. Nonprofit Capital and Shattuck Hammond Partners were sub-advisors to the transaction. The A-1 tranche of the deal carries a 9.1-weighted average life and priced at 55 basis points over.
Dillon Read Capital Management, the new alternative asset manager within UBS Global Asset Management, brought the $1 billion hybrid cash and synthetic Dillon Read CMBS CDO 2006-1 to market. The deal was anticipated to come with a $650 million unfunded super senior liquidity facility. The arrangers are aiming for a 73% portfolio share of CDS referencing CMBS and commercial real estate; 27% will include a mix of cash CMBS, CRE CDO notes and REIT debt. The deal has a five-year reinvestment period and 10-year maximum weighted average life. Dillon Read was formed from the more than 200 employees that encompassed UBS' principal finance and credit arbitrage and commercial real estate groups.