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Anthracite breaks new ground in Europe

Given that the US CRE CDO market saw over $34 billion issued in 2006, it is not surprising that substantial time and effort have been invested in trying to establish this asset class in Europe.

Euromoney Liquid real estate March 2007 

» at a glance:


» Deal: Anthracite CRE CDO
»
Amount: €342 million
»
Lead manager: Morgan Stanley

The European CMBS market itself only found its feet in the last two years (having grown 35% year-on-year in 2006 to more than €75 billion), so the fact that two European CRE CDOs were closed late in the year is remarkable.

CRE CDOs repackage pools of junior real estate collateral into floating rate debt securities, facilitating a cheaper weighted average cost of capital on this relatively expensive, subordinated debt. This type of collateral has traditionally been funded by short term recourse lending, which has to be marked to market, so CRE CDOs offer attractive match funding benefits for issuers as well.

Anthracite Euro CRE CDO is a €342 million managed cash arbitrage securitization of a pool of real estate assets overwhelmingly split between CMBS and B notes (39% each). The remainder of the initial pool is made up of mezzanine loans and C notes (11% each). The assets have a weighted average life of 5.5 years, weighted average rating factor of single-B plus and a weighted average spread of 340bp.

The asset pool, which will be managed by Blackrock Financial Management, backs €343 million notes tranched from triple-A to double-B.

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