January 15, 2009 / 3:45 PM / 9 years ago

Aladdin Capital cuts 15 jobs, shifts to corp bonds

NEW YORK, Jan 15 (Reuters) - Aladdin Capital Holdings’ chief investment officer said on Thursday he has cut 15 jobs in the company’s structured bond business as it shifts focus to investment opportunities in corporate bonds and the loan market.

The latest moves mark Aladdin Capital’s transition from a Stamford, Connecticut-based alternative asset manager to a boutique investment bank under its recently hired CIO.

Vice Chairman and CIO Neal Neilinger said he made the cuts to the company’s collateralized debt and loan obligation desk, trimming global headcount to about 75 staffers.

“We are going back to good old-fashioned investing,” Neilinger said in an interview.

Neilinger, who joined the firm in October from Calyon, the corporate and investment banking arm of the Credit Agricole group, said the moves are part of a restructuring plan to build its advisory and investment banking businesses. He does not anticipate significant origination of CDOs or CLOs in the next 18 months.

Global issuance of CDOs plunged to $60.9 billion in 2008, versus $442.5 billion in 2007 and a record $478.8 billion in 2006, according to Thomson Reuters data.

That drop in business has spurred massive job cuts and restructuring across the financial industry impacting Wall Street, rating firms and asset managers.

Corporate bonds in the United States and Western Europe offer good value, Neilinger said, after corporate bond spreads recently hit record wide levels.

High-grade corporate bond spreads have rallied over the past month, narrowing to 560 basis points through Wednesday, from a record 656 basis points in December, according to Merrill Lynch & Co data.

Sales of investment-grade bonds slid almost 35 percent to $645 billion in 2008, from $986.8 billion in 2007, according to Thomson Reuters data.

After a four-month freeze on new issuance following the first half of 2008, the primary market has reopened on the back of an FDIC plan to guarantee the new debt.

Companies sold $44 billion of debt in November, $16 billion of which was backed by the FDIC. In December, the number rose to $86 billion, of which $63 billion was backed by the FDIC.

In 2009, companies have sold $52 billion of debt, $9 billion of which was backed by the FDIC.

“I see tons of value in investment-grade corporate bonds, certain sectors of the levered loan market, agency and mortgage products,” he said.

He said he sees less value in U.S. Treasuries.

“The name of the game in the last year was Treasuries,” Neilinger said. “Now you have to watch that market. It has the characteristics of a bubble all over it.”

Benchmark 10-year note yields, which move inversely to prices, are trading not far above December’s five-decade low of 2.04 percent and could fall back to that area if stress in the financial system should rise and signs of economic distress intensify, analysts have said. (Reporting by Walden Siew; Editing by Tom Hals)

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