Citigroup is arranging collateralized debt obligations with synthetic exposure to asset-backed securities. The firm is structuring two full capital structure CDOs comprising tranches of BBB, A, AA and AAA-rated ABS credit-default swaps and cash assets. The majority of the assets are expected to be U.S. home equities and the structures will have maturities of five to seven years.
An official close to the firm said the deals will hit the market in September and be pitched to investors in Europe, Asia and the U.S. "The deals will be marketed to the firm's typical cash ABS CDO investors," he said, noting both deals will be partially managed by an outside party who can replace poor-performing assets. The name of the manager and potential size of the deals could not be determined.
Chris Carman, managing director in structured credit at Citi in London, declined to comment on the deals, but said a number of houses are feeding the current appetite for synthetic ABS transactions. "The signs are positive for ABS CDOs at the moment," he said.
Citigroup also issues static single portfolios of synthetic ABS regularly, at a rate of about USD100 million a month. Carman declined comment on the detail of those structures.
