Dresdner Kleinwort Wasserstein has restructured its Petra III collateralized debt obligation. The move was made to improve the deal's performance and keep the investors involved in DrKW's Petra CDO program, says Stratis Hatzistefanis, head of structured credit products in London.
Petra III is a E2.3 billion static synthetic CDO with an underlying poll of 232 bonds. E10 million is allocated to each underlying position. DrKW has replaced three underperforming bonds--one each from El Paso, Cable & Wireless and Ahold--with three triple-B rated names: Air France, Accor and France Telecom. DrKW was able to lay off the cost of the three bonds dropped from Petra III through a separate private deal, says Hatzistefanis.
Hatzistefanis says that even though Petra III is a static deal, which generally means the collateral manager does not make any changes to the underlying pool, DrKW sought bondholder approval to make the substitutions, enabling a restructuring to take place.
Hatzistefanis says that aside from the replacement of the three bonds, nothing else about the deal has changed. There is no change in its maturity, there were no costs to the investors and no change in the deal's subordination. Hatzistefanis says that restructuring CDOs is rare and believes Petra III's case is the first time a static synthetic CDO has been restructured without changing the deal fundamentally.