Demand for structured credit rated by Standard & Poor's is increasing on the back of its new rating methodology. Credit officials say buyers of high-grade, bespoke, single-tranche collateralized debt obligations are requesting S&P-only ratings because the agency attaches higher ratings to tranches with less subordination. This means investors' rating constraints and return targets can be met more easily.
Perry Inglis, managing director and head of the European CDO group at S&P in London, said the market is adapting offerings to make the most of its more lenient treatment of high-grade tranches. "We are beginning to see more of this type of transaction," he said.
Players declined to put a figure on the number of S&P-only rated deals closed because they are all privately-transacted, but agreed a lot had gone through over the past month, particularly in the mezzanine space. One structurer said the full effect of the S&P model change on larger, public deals will not be known until it is implemented at the end of March. "It will certainly differentiate the agencies," he added.
Calyon last month launched a S&P-only rated public CDO called Sonata (DW, 1/13). An official close to the transaction said about EUR400 million had been sold with more taps expected in March.