The CDO securities consist of $692 million of investment grade notes, representing 83% of the transaction; $31 million of non-investment grade notes, accounting for 4%, and $110 million of preference shares, constituting 13% of the deal. RAIT owns all of the non-investment grade notes and preference shares and will consolidate the CDO issuer for financial reporting purposes. RAIT also invested $11 million, net of financing, in selected investment grade notes.
The weighted-average interest rate for the investment grade securities is one-month Libor plus 63.3 basis points. Notes issued by the CDO issuer pay interest on a monthly basis. The CDO debt matures in 2045, and the CDO indenture, which is the written agreement regarding indebtedness, provides for a five-year reinvestment period during which RAIT can use the proceeds of repayments of loans included in the collateral to finance new investments to replace collateral that is repaid.
After that, the CDO securities will be redeemed in order of priority as collateral is repaid. Notes issued by the CDO issuer have an expected average life that ranges from 6.1 years to 10 years.
The CDO issuer purchased approximately $482 million of assets, which include whole loans, mezzanine loans, B-notes and preferred equity interests in real estate. Under terms of the CDO indenture, RAIT has an initial investment period of approximately nine months from the closing date, during with it expects to acquire $333 million of additional CDO assets.
A subsidiary of RAIT will be the collateral manager for the CDO. Because the CDO transactions are private transactions, a RAIT spokesman has told GlobeSt.com that information regarding them is limited to what is contained in the company's statements.
The ability to close and manage CDOs was cited as a chief benefit from the Dec. 11, 2006 merger between RAIT Investment Trust and Taberna Realty Finance Trust that created the current company. Betsey Cohen is chairman, and Daniel Cohen, her son and former CEO of Taberna, is RAIT's CEO. During a May 3 conference call, Daniel Cohen said the company's goal was to complete between six and eight such transactions this year.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
