Mezzanine ABS CDOs: Rarity pays for Aegis
Aegis – the ABS fund manager established by Richard Stow and Miguel Alcober two years ago – has sold its first CDO, Cavendish Square Funding, via BNP Paribas.
The €261.45 million deal was unusual in being already 50% ramped up. This has given the managers scope to have a higher degree of diversity than is the norm. This is a CDO of mezzanine ABS, with the portfolio largely backed by residential loans, both prime (38%) and sub-prime (29%) followed by 10% CMBS. There is also a very small CDO bucket of 5%.
Stow and Alcober managed to avoid paying up for their first deal for a couple of reasons. In addition to its diversity, Cavendish Square benefited greatly from good timing. The structured finance primary market in January was extremely quiet, which shifted the supply and demand dynamic in favour of issuers. The triple As printed at three-month Euribor plus 27 basis points but lower down the capital structure the double As were some 10bp inside the comparable classes on the ABS CDOs from Faxtor and Zoo. The differences were even more substantial on the single As and triple Bs (20bp).
The boom in managed ABS CDOs slowed substantially in the past year as interest in structured finance from the wider institutional investor community increased, making it increasingly difficult for managers to source assets.