Australia's Macquarie Bank is planning to sell a multi-billion dollar collateralized debt obligation to retail invetors in New Zealand. The CDO will be the bank's second, having launched the first such deal, dubbed Generator 1, earlier this year. Craig Swanger, head of the financial services group in Auckland, said he expects the deal to be launched in the first quarter, but is waiting for global credit spreads to widen.
The reference portfolio is likely to be at least NZD6.44 billion (USD4.14 billion) and comprised of over 100 credit-default swaps. "This will have minimal overlap with Generator 1," added Swanger. For example, the first CDO contained some Australian and Kiwi names, and given the limited number of liquid credits, Japanese and Asian names will likely be incorporated instead. U.S. and European default swaps, however, will make up the vast majority of the portfolio. Retail investment sizes range from NZD10,000-3 million.
Its first retail CDO was structured as a static deal in which the single A minus tranche was sold to retail clients and the remaining portions were bought by institutional investors. This time, however, Macquarie may structure Generator 2 as a single-tranche CDO and delta hedge the rest of the deal.
ABN AMRO, Citigroup and ING Financial Markets have also issued CDOs for the New Zealand retail market.