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June 29, 2018  

Ares Shops Big Package of Freddie B-Pieces

Ares Management is marketing $460 million of seasoned subordinate bonds from several Freddie Mac securitizations.

The bid list is unusual. Buyers typically hold Freddie B-pieces until maturity, and the infrequent secondary-market offerings typically involve smaller batches.

But Ares evidently hopes to capitalize on a recent spike in demand for high-yielding paper. Market pros said the New York investment manager, which has $112 billion of assets under management, is willing to sell its bid list to one buyer or multiple buyers — whichever brings the best execution. Bank of America and Amherst Securities are running the auction.

The bid list contains fixed-rate bonds with original terms of either seven or 10 years. The securities are said to be from eight or nine securitizations.

From 2013 to 2017, Ares acquired B-pieces with a total face amount of $946.3 million from 11 Freddie deals. The bid list was culled from that portfolio.

In March, four investors marketed $1.1 billion of B-pieces from conduit deals. Morgan Stanley represented the sellers — Eightfold Real Estate Capital, Ellington Management, KKR and Seer Capital. The unspecified portion of the offering that sold is believed to have fetched favorable prices.

Ares is hoping for similar results. Lower-rated bonds across fixed-income markets are enjoying newfound liquidity, with growing demand leading to higher prices.

In Freddie offerings, the B-piece consists of a single unrated class that equals at least 7.5% of the transaction’s face amount.