The pricing of the Four Corners fund is a stark contrast to 2002, when the firm had to shelve its debut structured fund amid a series of CDO downgrades, widening spreads for AAA bonds and a storm of bankruptcies and defaults. However, despite the perfect storm in the credit markets, leveraged loan CLOs suffered very few downgrades and now the biggest issue managers are facing is the imbalance of supply and demand. "There is insatiable demand for CLO paper," one CDO syndicate banker said. Indeed, some CLOs are in the pipeline that could equal or even push through the 30 barrier in the coming weeks.
Four Corners CLO 2005-1, executed by Morgan Stanley, is 75% comprised of AAA tranches and has a $27 million equity piece. It differs from MJX's slightly unconventional Vista fund, which has a shorter maturity of seven years and debt-friendly aspects to the waterfall. McAdams, president and ceo, of Four Corners, and a Morgan Stanley CDO banker declined comment. Hans Christensen, portfolio manager and founder of MJX, referred questions to Steve Hilfer of CSFB, who did not return calls.
Four Corners' track record in leveraged loans contributed to the senior liability pricing. A majority-owned subsidiary of Australia's Macquarie Bank, Four Corners was founded in 2001 and since then has amassed more than $2.3 billion in assets. The firm's staff includes Robert Bernstein, managing director and cio, and Beth Digati, senior v.p. of portfolio trading. Prior to Four Corners, McAdams was president, ceo and cio of ING Capital Advisors and was also responsible for the first retail senior floating-rate loan fund, the Pilgrim Prime Rate Trust.
