Amadeusz Juskowiak

Kidder unit sells cmos including floaters

Kidder Peabody Mortgage Assets Trust Five a unit of Kidder Peabody and Co Inc is offering 500 mln dlrs of collateralized mortgage obligations in seven classes including floatingrate and inverserate tranches

Sole manager Kidder Peabody said the first floatingrate class has an initial rate of 6755 pct that will be reset quarterly at 40 basis points over threemonth LIBOR with an 11 pct cap

Totaling 533 mln dlrs this floatingrate class contains a socalled catchup provision that allows investors to recapture possible lost interest according to Kidder Peabody

For instance if threemonth LIBOR rises to 15 pct during the life of the floatingrate tranche and falls back below the 11 pct cap investors would be paid back dollar for dollar the amount of interest they would have received if the CMOs did not carry a maximum interest rate a Kidder officer said

Kidder Peabody introduced this concept on February 12

The other floatingrate class totals 1324 mln dlrs and has an initial rate of 6975 pct that will be reset quarterly at 60 basis points over threemonth LIBOR with a 13 pct cap This tranche does not have a catchup provision the Kidder officer said

The inverserate tranche totals 713 mln dlrs and has an initial rate of 10903 pct The rate will be reset quarterly according to the formula of 2244027 minus the product of 18097 times threemonth LIBOR

Yields on the remaining fixedrate CMOs the balance of the 500 mln dlr issue range from 714 to 927 pct or 90 to 160 basis points over comparable Treasuries

The issue is rated a topflight AAA by Standard and Poors

Reuter