HSBC has been rolling out managed principal-protected equity tranche deals as it looks to raise its credit derivatives profile in the region. The firm has launched three equity tranche structures this year using both U.S. and European managers and has a handful of transactions in the pipeline, said Jeffrey Tolk, head of credit structuring in Hong Kong.
"The value is currently in the first-loss piece," said Tolk, noting a shift in implied correlation that began last year has caused value to migrate from the senior portion of the capital structure to the equity. "Investors recognize the value in the equity and are getting more comfortable with these types of deals, especially where there is management or principal protection," he added.
Tolk built up a credit structuring desk last year for Asia with several transfers and high-profile hires (DW, 8/12).
