Commonwealth Bank of Australia last week was in the final stages of completing an AUD159.2 million (USD105.6 million) repackaged synthetic collateralized debt obligation, the first multi-tranche deal of its kind in Australia. "This provides an opportunity for Australian investors to diversify while picking up some yield," said Rob Nankivell, head of structured securities in Sydney.
Nankivell said the bank combined the credit risk of the mezzanine tranche of a 100-name USD100 million global static synthetic CDO with AAA rated Australian residential mortgage-backed securities. "Single tranche deals of this nature have been sold before in Australia, but I believe this is the first one with this many tranches sold concurrently," said Nankivell. The four-tranche CDO is comprised of investment-grade global credits, with Aussie names accounting for roughly 15%.
There is growing interest in the credit market because of the poor performance of equities, however, many Australian borrowers have been moving offshore because they can get cheaper funding levels in deeper markets such as the U.S. (DW, 4/20), resulting in a dearth of outstanding domestic credits offering attractive yields. "We're trying to fill that gap," added Nankivell, explaining the timing of the product.
CBA is planning to offer four Australian-dollar denominated tranches: AUD96 million of AAA; AUD46 million of AA; AUD9 million of A and AUD8.2 million of BBB risk.