US investment bank Morgan Stanley is arranging a €4 billion plus synthetic collateralised debt obligation (CDO) due to be managed by London-based investment boutique Cheyne Capital Management.The CDO is unusual as it is one of the largest this year, containing an equity portion of about €100 million. It will need to be very well diversified, said a credit structurer at a rival investment bank.
“It’s a big job for two young guys,” said another, referring to John Weiss and David Peacock that Cheyne recently hired from Goldman Sachs. But Peacock and Weiss will draw on Cheyne's existing expertise in the area - the investment boutique has been active in two other large CDO issues.
The mezzanine tranche A to BBB will also be worth around $100 million, with the remainder AAA investment grade. Demand for the CDO, based on about 290 reference credit default swaps, should prove a bell-weather for the CDO market, hit by a reduction in investor appetite to pick up equity and mezzanine tranches in the past 18 months.
Deutsche Bank research pointed to a fall in the overall CDO market last year, but European CDO issuance continued growing.
However, Cheyne has already lined up investors for the equity portion, bankers said, and is awaiting credit ratings on the structure.
Cheyne is a spin-off from Morgan Stanley and employs a number of ex-Morgan Stanley asset managers, in addition to Weiss and Peacock.
Topics: Cheyne Capital Management
More on Credit Derivatives
Managed deals could be next, but market's potential is expected to be limited
Active deals seen as “the next step” after last year’s revival of static CDOs
Risk Awards 2015: BlueMountain founder is at the centre of a changing market
Sign up for Risk.net email alerts
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.