At press time last week only one visible CDO priced, a $400 million arbitrage cashflow CLO for Denali Capital’s at +43 basis points over three-month Libor (WAL 7.4-year) via JPMorgan. FSA wrapped the senior notes that had a double-A shadow rating prior to the surety bond.
Relative to the other segments of the credit markets, the senior notes on most CDO deals are coming relatively tight, CLOs are averaging +44 basis points over Libor, according to Credit Suisse First Boston’s Market Watch Weekly. However, IFR Asset-Backed Securities notes that CDO sub bonds have been pricing less predictably.
Denali was no exception, and that the firm was founded in 2001 did not help.
In fact, market seemed to overlook the fact that Denali’s management had structured CDOs at First Source Financial, as the pricing on the unwrapped sub notes priced outside the market average, which is largely made up of top tier issuers.
The Denali 10-year average life single-As priced at +145, compared to Oak Hill Advisors’ post September 11th cash CLO (via Deutsche Bank) single-A 10-year at +130, both at par.
Meanwhile, the triple-Bs on Denali printed at +265, compared to Oak Hill’s +210. The double-Bs on Deanli, typically the hardest tranche to sell, had a +700 spread at a dollar price of 95.38 (yield not disclosed) and the fixed double-Bs priced to yield 13.05%.
Goldman Sachs is ready to print a $400 million arbitrage cashflow CLO called Ares V that was heard at +45 over three-month Libor, according to one conduit investor. This week’s business is also the $580 million FSA wrapped arbitrage cashflow high-yield CBO GSC Partners III, talked at +55 basis points over three month Libor via Lehman Brothers. The deal is talked at mid 50s largely due to investors demanding a premium for the single-A shadow rating on the senior notes.
Another deal talking its triple-As with a five handle is Bear Stearns Asset Management’s $274 million BSC Amortizing High-Yield CBO 2000-1.
BSC’s talk is +50 basis points over six-month Libor with the triple-Bs at +250. This BSC is said to have a static pool, however some trading is expected to be allowed for credit purposes.
CIBC World Markets still has the $700 million ARK II distressed loan CDO in the market with guidance at +50 basis points that is rushing to close by Oct. 26, matching the CIBC’s (also the originator) financial year-end, buyside sources noted.