HSBC last week closed a synthetic collateralized debt obligation in Australia with a bonus payment linked to a first-to-default basket, which the firm says is a first-ever. "The Australian direct investment marketplace is mature and sophisticated and product differentiation is essential," said Jamie Spence, director in structured credit products at HSBC in Hong Kong.
The deal, dubbed Blue Gum after an Australian tree, is being distributed in the Aussie market via Grange Securities, an Australian-based investment bank. The CDO is referenced to a pool of 100 global credit-default swaps with a maturity of seven-and-a-half years. An additional bonus payment of 4% is offered on a separate FTD basket after five years, providing no credit event occurs among the eight credits that comprise global names including a few Aussie references. "The FTD is mutually exclusive and offers a bonus coupon to boost the attractiveness of the structure," he added. Spence noted the transaction is also the first in Australia to carry a dual rating, which is AA minus from Standard & Poor's and Aa3 from Moody's Investors Service.
