Dealers Vie for Securities Linked to AIG Rescue
NEW YORK--At least six Wall Street dealers are preparing bids for more than $7 billion in complex commercial-mortgage securities, which are part of assets tied to the Federal Reserve Bank of New York's bailout of American International Group Inc., according to investors briefed by dealers.</br></br>Deutsche Bank, Bank of America Corp., Morgan Stanley, Credit Suisse, Goldman Sachs Group Inc. and Barclays are preparing bids for the debt securities, the investors said.</br></br>The dealers are focused on so-called commercial-real-estate collateralized-debt-obligations, which are a corner of the $47 billion face amount of debt held by the New York Fed portfolio known as Maiden Lane III. They are primarily focused on dismantling the so-called CRE CDOs because the underlying commercial mortgage-backed securities are worth more as individual pieces and could likely generate more trading revenue, the investors said.</br></br>But the liquidation rests on the elimination of an interest-rate swap with Barclays, the counterparty in the derivative transaction. As the swap was put on when interest rates were higher, the contract has risen in value and would require a payment of more than $1 billion to Barclays if the CDO was to be unwound, two of the investors said.</br></br>Spokesmen for Deutsche Bank, Bank of America, Morgan Stanley, Credit Suisse, Barclays, Goldman Sachs and the New York Fed declined to comment.