UBS Taps Leveraged Loan CDS To Hedge Portfolio

UBS has entered two leveraged loan credit-default swaps to disperse risk in its loan book.

  • 03 Nov 2006
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UBS has entered two leveraged loan credit-default swaps to disperse risk in its loan book. This is the first time the Swiss firm has entered this kind of swap, which references an aggregate USD600 million portfolio of 87 sub-investment-grade corporate loans.

The swap maturities are tied to the maturity of the underlying loans. Dan Ladd, head of loan portfolio risk management at UBS in New York, said the counterparty is a major dealer chosen through an auction process and the fixed premium is higher than standard on-the-run LCDS protection. He declined to name the counterparty or specify the price paid for protection.

UBS opted to enter a bilateral swap rather than a securitization because it allowed faster and easier execution. "It is a very efficient way of managing risk," Ladd said. "We are definitely looking forward to using this instrument on an ongoing basis."

The swap documents--written using modified International Swaps and Derivatives Association LCDS documents--include a built-in call feature to terminate the swap if the loan is repaid. Unlike standard U.S. LCDS, restructuring is considered a credit event for these swaps. The modified restructuring feature provides regulatory capital relief that would not be available with standard LCDS under Basel I, and significantly more relief than LCDS under Basel II, Ladd said.

  • 03 Nov 2006

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 13 Mar 2017
1 JPMorgan 94,925.33 384 8.39%
2 Citi 87,531.58 331 7.74%
3 Bank of America Merrill Lynch 84,341.49 288 7.46%
4 Barclays 75,288.19 241 6.66%
5 Goldman Sachs 68,504.71 208 6.06%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 14 Mar 2017
1 Bank of America Merrill Lynch 10,650.87 23 11.13%
2 Deutsche Bank 8,169.49 17 8.53%
3 HSBC 6,243.46 23 6.52%
4 Citi 4,355.35 13 4.55%
5 SG Corporate & Investment Banking 4,273.37 17 4.46%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 21 Mar 2017
1 JPMorgan 5,440.56 17 10.74%
2 Deutsche Bank 4,468.97 23 8.82%
3 UBS 3,742.72 17 7.39%
4 Citi 3,393.89 23 6.70%
5 Goldman Sachs 3,360.93 18 6.63%