How Merrill Lynch process a CDO deal

--a client - known as collateral manager such as PIMCO - approaches ML to provide financing for a CDO that will hold 1 bil worth of bonds backed by subprime mortgages --Merrill Lynch makes 1 bil available to them, taking a fee of 1.5% to 2%. Collateral manager uses the balance to purchase bonds backed by pools of subprime mortgages, known as mortgage ABS. --At the same time, ML's structure finance team goes to work creating a variety of bonds taht will be backed the interest and principal the CDO collects on the asset-backed securities it owns. The bonds are also known as CDOs --ML's sales force will peddle to hedge funds, pension funds, and other investors.