BOSTON - FleetBoston Financial Corp. said Wednesday that it has formed a unit to enter the business of managing collateralized loan obligations.
In a statement, the company said Flagship Capital Management plans to raise its first obligation this year.
Fleet has been building its brokerage and capital markets capabilities in recent months. This summer it struck a deal to acquire M.J. Meehan & Co., a specialist firm on the New York Stock Exchange. The deal would make Fleet the largest specialist firm on the exchange in stocks represented.
"The addition of Flagship will allow us to broaden our participation in the industry and take advantage of our proprietary deal flow as well as transactions originated by others," said Timothy J. Conway, managing director and head of Fleet's debt capital markets group.
Collateralized loan obligations are debt securities that are collateralized by commercial loans The market for these obligations is roughly 10 years old and has grown to about $100 billion.
The term "CLO" refers to an entire structured finance transaction in which multiple classes of debt or equity securities are issued by a special purpose vehicle whose assets are mainly commercial loans.
