CDO manager sells securities

Los Angeles-based TCW Group, one of the biggest managers of so-called collateralized debt obligations, or CDOs, said it sold $3.2 billion of mortgage securities backing one CDO after the value of the bonds fell.

A decline in the price of securities in the CDO, called Westways Funding X, triggered a clause that demanded that assets be sold so holders of the highest-rated pieces wouldn’t incur losses, TCW said Thursday in a statement.

“Westways X did not experience any delinquencies or credit-performance issues, but did experience widening [interest-rate] spreads consistent with all non-Treasury fixed income sectors,” TCW said. “The resulting pricing declines, while modest by most financial market standards, have been sufficient to cause the structure’s net asset value to fall below a critical threshold.”

CDOs take pools of securities and divide them into pieces with different credit ratings, from no rating through AAA. Most CDOs can hold assets until they mature. Others, such as Westways, have tests based on the price of their holdings that are designed to protect investors who buy higher-rated portions of the CDOs before losses eat through lower-rated classes.

Citigroup Inc. managed the sale of the Westways X CDO securities to investors in February, according to the prospectus for the issue. Danielle Romero-Apsilos, a spokeswoman for Citigroup, didn’t have an immediate comment.

CDOs are complex securities that were highly popular with institutional investors until the mortgage market’s troubles began to deepen this summer.