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
  • 24 Jul 2017
1 Citi 253,106.92 930 8.89%
2 JPMorgan 230,914.50 1036 8.11%
3 Bank of America Merrill Lynch 221,389.46 762 7.78%
4 Goldman Sachs 171,499.26 554 6.03%
5 Barclays 169,046.60 646 5.94%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 25 Jul 2017
1 HSBC 27,039.93 106 7.36%
2 Deutsche Bank 25,125.19 81 6.84%
3 Bank of America Merrill Lynch 23,128.33 61 6.29%
4 BNP Paribas 19,315.94 110 5.26%
5 Credit Agricole CIB 18,706.93 106 5.09%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 25 Jul 2017
1 JPMorgan 13,488.13 59 8.47%
2 Citi 11,496.21 73 7.22%
3 UBS 11,302.86 45 7.09%
4 Morgan Stanley 10,864.95 59 6.82%
5 Goldman Sachs 10,434.21 54 6.55%