The U.S. dealer-led CDS on ABS pay-as-you-go template has emerged as investors' preferred documentation on both sides of the Atlantic. Both U.S and European structured credit investors at a recent CDO conference in Monte Carlo said they favor pay-as-you-go over the European-developed cash-settlement format because it is easier to understand and more transparent. In particular, it appeals to investors crossing from the cash market because the documentation reads like a cash-based investment, said one U.S. investor. "Europe lacks a good format," agreed Jeroen Bakker, a managing partner at Dutch asset manager Faxtor Securities B.V. Officials at the three major rating agencies noted the majority of synthetic ABS structures they see feature pay-as-you-go terms.
Pay-As-You-Go Is Frontrunner For CDS On ABS Investors
