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RAIT Steps Up CDO Pace With $833M Deal

PHILADELPHIA-With the close of RAIT Preferred Funding II, the specialty finance company has 11 collateralized debt obligation transactions under its belt.

By Marita Thomas | Updated on June 08, 2007

PHILADELPHIA-RAIT Financial Trust has closed RAIT Preferred Funding II, an $833-million commercial real estate collateralized debt obligation transaction. This is the locally based specialty finance company’s 11th CDO.

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.

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