ACA Management is well under way with its plans to issue five to six CDOs, mostly investment-grade, per annum, according to senior company officials.
The firm, created in 2001, closed a $1 billion notional pure synthetic managed investment-grade (IG) CDO with Commerzbank in early February and has a $1 billion managed synthetic IG CDO in the market via UBS Warburg currently (ACA CDS Funding Ltd).
ACA likely has given out several mandates for upcoming deals, such as one to Credit Suisse First Boston, for a $300 million to $400 million arbitrage cashflow structured finance CDO.
The firm’s $1 billion managed synthetic IG CDO is impressing a few investors, as its is a conservative, well structured deal that isn’t getting spread from arbitraging the rating agencies, said an investor closely examining the transaction.
The investor added that he expects the triple-As to price in the mid-50s, which is close to five basis points tighter than Bear Stearns’ recent Synthetic CDOs: Sutter and GIA (both priced AAAs at +60bp/L on 5y A/L deals). Compared to many IG CDOs, ACA CDS are said to be underleveraged, added the investor.
Major selling points for the account were that the deal had a minimum of 100 genuinely different obligor reference entities, a high diversity score target of 60 versus a frequent 38-42, and a pool of solid IG corporations. “This looks like a pool of conservative credits run by an insurance company, not a small asset management shop looking for big equity returns,” said one source. ACA apparently is taking between 50-100% of the equity and 100% of the $30 million A-IO AAA tranche.
An example of ACA keeping a conservative pool is that in the 2% aerospace and defense bucket, most of the names are in the defense industry, not airlines. For telecom, most of the names are utility, cash generating companies.