Milbank Tweed Hadley & McCloy has successfully adapted two-year-old MTN documentation to create the Aria collateralized debt obligation (CDO), the first widely offered managed synthetic CDO to come to market as a programme.
The $1.3 billion deal was arranged by JPMorgan and references 140 corporate names. The deal had 27 separate issuances, using the flexibility of a programme to create bespoke tranches of notes and adapting the documentation accordingly.
Aria's flexibility extends to issuing in five currencies: euros, dollars, sterling, yen and Swiss francs, and paying floating, fixed or inflation-linked coupons with a range of ratings.
Said John Walker, who led the Milbank team: "Drawing on our expertise in sophisticated CDOs and other types of structured financing, we were able to develop this unique financing by harnessing MTN technology to the synthetic CDO technique. As a result Aria is an incredibly dynamic transaction structure that tailors a particular issue of securities to the requirements of a specific investor."
"From the issuer or portfolio manager's perspective, using a programme with its pre-set documentation makes issuing quicker and easier because you don't have to document from scratch every time," added Milbank's other partner on the deal, Tom Siebens.
JP Morgan also acted as swap counterparty. Axa Investment Managers, advised by Linklaters, was asset manager. The deal was syndicated to Mizuho, Gulf International Bank, Natexis Banques Populaires and The Korea Development Bank. Linklaters also produced the original 2002 MTN documentation adapted for Aria.
... as the repackaging sector continues to develop
The repackaging sector continues to grow, creating new structures and innovations on a regular basis. So-called squared CDOs, which are structures that reference other CDOs, are a growing area, and cubed CDOs, which reference squared deals, are also developing. Collateralized fund obligations (CFOs), which reference hedge funds, are also increasingly popular. Table 1 lists a number of recent deals and the legal advisers.
Deal |
Type |
Manager/arranger |
Law firms |
Closed |
Aria |
Managed synthetic CDO |
AXA Investment Managers/JP Morgan |
Milbank Tweed Hadley & McCloy for the arranger, dealers and co-issuing companies on English and US law; Linklaters to the portfolio manager on English, French and US law; Matheson Ormsby Prentice for each Irish issuer; and Mourant du Feu & Jeune for each Jersey issuer |
July 13 2004 |
Rhodes (Alexandria Capital Series 2004-6) |
CDO squared |
Dresdner Kleinwort Wasserstein |
Ashurst for the lead manager and arranger on English and Belgian law; A&L Goodbody on Irish law |
June 30 2004 |
Betsen CDO |
CDO squared |
Calyon |
Ashurst for the dealer on English law; Ogier & Le Masurier for the issuer on Jersey law |
June 30 2004 |
Vallauris CLO |
Leveraged loans |
Natexis Asset Management/Natexis Banques Populaires |
Ashurst for the lead managers and trustee on English law; McKee Nelson for the joint managers on US law; A&L Goodbody for the issuer on Irish law; and Clifford Chance for the collateral managers on English and French law |
July 22 2004 |
Credico Funding 2 |
Club funding collateralized bond obligation |
Iccrea Banca |
Allen & Overy as adviser to Iccreas as arranger and Studio Legale Gambino as adviser to Iccrea in all other capacities |
July 22 2004 |
Petrusse European CLO |
Leveraged loan |
Invesco/Lehman Brothers |
Allen & Overy for the managers on US law; Ashurst for the collateral manager on US and English law; Kremer Associés & Clifford Chance for the managers on Luxembourg law; Gardere Wynne Sewell for the trustee on US law |
June 30 2004 |
Thunderbird series 10 |
Synthetic CDO |
BNP Paribas |
Lovells for the lead manager and trustee for French and English law; Simont Braun on Belgian law; and Matheson Ormsby Prentice on Irish law |
August 4 2004 |
Thunderbird series 11 |
Synthetic CDO |
BNP Paribas |
Linklaters for the lead manager and trustee on English and Belgian law; Matheson Ormsby Prentice on Irish law |
August 16 2004 |
Jubilee CDO IV |
Senior and mezzanine loan CDO |
Alcentra/JP Morgan |
Linklaters for the investment manager; Ashurst for the initial purchaser and trustee on English law; McKee Nelson for the initial purchaser on US law; Clifford Chance for the initial purchaser on Dutch law |
August 5 2004 |
*Source: Perfect Filings |
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