Bank of America has asked Moody's Investors Service to rate a EUR360 million (USD318 million) collateralized debt obligation because a Fitch rating alone could not shift the deal. Hans-Jurg Lips, managing director structured credit products at Bank of America in London, said the firm's experience in the U.S. and the collateral seller's experience in Italy lead it to believe a Fitch rating alone would be sufficient to move the deal in Europe.
He said BofA discovered the error when it tapped the market and European investors asked for two ratings, with one of them from Moody's. A structurer at a rival bank said, "It "it shows you what a Fitch rating is worth these days." Lips said the bank decided not to go for two ratings from the beginning to keep the cost of the transaction to a minimum. The collateral seller in the deal was Banca Monte dei Paschi di Siena.
Vintage Capital is a 10-year semi-synthetic CDO. The reference entity is EUR360 million of Banca Monte dei Paschi di Siena's portfolio, EUR162 million of which is credit default swaps which have been added to the portfolio to increase diversity. The remainder is bonds and asset-backed securities. For further details, visit DW's web site (www.derivativesweek.com).
Martina Spaeth, associate director and CDO analyst at Fitch in London, said CDOs which only have Fitch ratings have been successfully placed, such as the Harbourmaster transaction Credit Suisse First Boston lead managed last month, so it is more likely to be a problem particular to this transaction. This could be either because the structure is unusual and investors want two ratings or there is one investor looking to buy the whole tranche who has requested a Moody's rating in addition to the Fitch rating. The structure is unusual because Bank of America retains the super senior tranche, whereas this is normally sold to an Organisation for Economic Co-operation and Development-based bank.