Wednesday, April 25, 2012

Maiden Lane III auctions within an auction?

*CORRECTION*Got it. They're basically using the Barclays proposed structure (It's joint between BARC, BAML, and NOM nom nom) to form MAXX 2012-MAX to CDO^2 to retranche the risk in the two current MAX A1 tranches for sale. They'll roll up the bids on their "new issue" to make a pass-through bid to the Fed. 

The competing bidding group appears to be Citi/Goldman's Sack/CS, and they are also soliciting bids from their clients that will effectively be passed through as a bid on the two MAX CDO tranches (and passed back in pro rata amounts if they get oversold), but they are not re-securitizing anything.

Both parties are charging a 0.25 mark up  for their strategy.

No one can blow up the original CDOs without consent of the MAX junior bondholders (purportedly DB) or paying off an interest rate swap to Barclays according to this one article.  And both of these strategies seem to put the CDOs far from any near-term scenario that would result in a flood of pure CMBS collateral on the streets.

Let me know if you have any more to add...

Prior post:
What is this MAX deal they're coming out with - it looks like BAML is basically trying issue a new deal to buy the two MAX CDOs from the Fed, structuring it, and charging a flat 0.25bps to investors to give them an opportunity to participate since the bidding list is limited. Is that accurate? I haven't spoken to anyone, just saw the messages flying around.


Anonymous said...

Good stuff DarkSpace keep it up.

Dark Space said...

Still had a few facts off - the BAML team included Morgan Stanley. Barclays and Deutsche bid separately, and they ultimately won, as has been widely reported. So I wonder if they bust it up (Deutsche purportedly owns the junior bonds) or resecuritize (Barclays purported plan).

Either way the market didn't really seem to notice with GG10 A4s in more than 10bps. It's like I just walked on to the trading desk with an 800 kilo highland cow, ate it all right there on the hoof, and promptly sat down to play with Excel and no one even noticed.

Anonymous said...

So the market didn't even hiccup at all?

Why all the frenetic reporting leading up to yesterday. Media made it seem like this was going to dent the market like MLII did to RMBS.


Concrete Jungle said...

AND there was another $3+ billion in new issue at the same time (Ala Moana, UBSCM 2012-C1, and JPMCC 2012-C6).

Someone at the CMBS dinner table has got to be holding back at least a little belch. If they let it out and prices get weak in the near term, I think it will be a good buying opportunity.

crabsofsteel said...

the market already ticked down a few points when the sale was announced. Their timing was excellent as many of these AJs will be way down in a year.