Lehman in trouble? Not so fast.
Another €2.17bn ($4bn) raised: Lehman has just closed a large commercial real estate CDO, named Excalibur. All in, it’s the same trick Lehman pulled with its stagnant LBO debt.
From S&P - who have just assigned preliminary ratings to the deal:
On the closing date the issuer will issue the notes and use the proceeds to acquire 62 commercial real estate assets from various Lehman Brothers entities.
The assets will be made up of senior/whole loans, commercial mortgage-backed securities (CMBS), mezzanine loans, development/land loans, B-notes, and corporate bank loans/structured debt, secured on a diversified pool of pan-European commercial real estate assets. The assets are denominated in various currencies.
There are two tranches in Excalibur - the class A notes, which total €2.17bn have been given an ‘A’ preliminary rating. The subordinate B notes, however, worth €720m, haven’t been rated. S&P also reports:
Unlike many CRE CDO transactions, this transaction is structured differently. For example, there is no portfolio manager, no collateral pool tests, and no eligibility criteria.
Which basically implies that Lehman is going to hold on to the subordinated tranche. With such inflexible terms, it would be a brave third-party indeed taking that on. There’s quite some subordination in the deal too - more than normal - which is probably what’s still allowing the senior notes to still achieve a reasonable credit rating.
All in, that brings the total monies raised by Lehman - including rights issue, credit facility, Freedom CLO and Excalibur CDO - to around $12.5bn - in a couple of months.
Not bad, on the sly.
