02.11.2006 10:06 Real Estate
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The specialist fund manager, a unit of Merrill Lynch, is in the early marketing stages of the first commercial real estate collateralised debt obligation (CRE CDO) to repackage risky European property debt, people familiar with the deal said.
The EU342.5m (?229m) CRE CDO sale, which is being run by Morgan Stanley, is expected to be followed by similar deals, with up to another two likely before the end of the year and forecasts of between six and 10 deals next year.
Other potential early issuers of CRE CDOs include Investec, the South African bank that wants to be one of Europe's top-five CDO issuers, and LNR, a specialist property fund manager majority owned by Cerberus.
Wachovia, a leading issuer of such deals in the US market, could also be an early mover.
Neither BlackRock or Morgan Stanley would comment on the CDO, but most such deals are expected to be backed by pools of risky subordinated slices of commercial mortgages, calledB-notes, and junior tranches of commercial mortgage-backed securities.
According to data from traders' screens, it will sell tranches rated from AAA/Aaa to BB/Ba2 thought to be by Fitch and Moody's and will be supported by a chunky EU66.5m unrated equity tranche, which will not be sold.
Early stage marketing of the deal is thought to have begun last Thursday and pricing could come in the last two weeks of November.
