Babson Capital Management Closes $600 Million "Hybrid" CDO
Springfield -- 02/12/2007 --
Babson Capital Management LLC ("Babson Capital"), an investment management firm based in Boston and Springfield, Mass., today announced the closing of a $600 million collateralized debt obligation (CDO). Sapphire Valley CDO, Ltd. (Sapphire Valley) consists of leveraged loans and collateralized loan obligation (CLO) securities. Its unique hybrid construction leverages the resources of the Babson Capital's bank loan and structured credit teams.
Sapphire Valley's portfolio consists of approximately 80% leveraged loans and 20% securities. Of the 20% securities, 40% are expected to be sourced synthetically via total return swaps (TRS), providing investors with assets that are difficult to source in the cash market.
"We are very pleased with investors' interest in Sapphire Valley," said Thomas M. Finke, Managing Director and Head of the firm's U.S. Bank Loan Team, which is based in Charlotte, N.C. "Its hybrid structure allows us to leverage the capabilities of both our leveraged loan and structured credit teams."
The weighted average cost of the debt for the transaction was LIBOR plus 46.
Banc of America Securities arranged the transaction. Buyers included a wide range of U.S. and non-U.S. institutional investors.
"The addition of TRS adds an additional dimension to the CDO," said Matthew Natcharian, Managing Director and Head of Babson Capital's Structured Credit team in Springfield. "TRS allowed us to increase our exposure to top tier managers from strong CLO vintages while reducing the time required to ramp-up."
Babson Capital's U.S. Bank Loan Team, with a staff of 63, is one of the leading leveraged loan and CLO managers in the U.S. and has more than $9 billion in loan assets under management. The 19-member Structured Credit team has nearly $5 billion in assets under management across the CDO risk spectrum from AAA rated debt to equity tranches.
S&P ranks Babson Capital as the second largest CDO manager in the world. It created its first structured fund in 1991, and with subsidiaries now manages more than 45 structured funds featuring a variety of asset classes and $18 billion in assets. The firm has more than 120 people supporting CDO activities in the US and Europe. The Structured Credit team makes extensive use of CDO World SM, Babson Capital's proprietary CDO analysis and monitoring system to capture and analyze CDO portfolio and market information.
About Babson Capital Management LLC
Babson Capital Management LLC and its subsidiaries serve institutional investors around the globe and have $128.9 billion in assets under management as of June 30, 2010. Through proprietary research and analysis and a focus on investment fundamentals, we develop products and strategies that leverage our broad array of expertise in fixed income, equities, alternative, structured products, debt financing for corporations and debt and equity financing for commercial real estate. Based in Boston and Springfield, Mass., and Charlotte, N.C., with offices in New York City and Los Angeles, the firm’s subsidiaries include Babson Capital Europe Limited in London, Babson Capital Australia Pty Ltd in Sydney, and Cornerstone Real Estate Advisers LLC in Hartford, Conn. Babson Capital is a member of the MassMutual Financial Group.