Swiss reinsurerSwiss Re is contemplating arranging a single tranche collateralized debt obligation of credit-default swaps referenced to asset-backed securities. A possible deal would be structured internally and marketed to institutional investors.Tido Meyerhoff, managing director in distribution at Swiss Re in London, declined comment.
An official close to Swiss Re said the firm is exploring both single-tranche and full capital structure deals, but the CDS underlying would most likely be high-grade ABS because the market is deeper and more liquid. "There is more need for investors to apply hedging initiatives in a CDS form," he said.
A time frame has not been set on a possible deal and there are no foreseeable market factors that would hold back a transaction, the official noted. Swiss Re's interest in a synthetic ABS transaction has been fuelled by investor appetite for the deals, the official said. An increase in standardized market practices, led by the International Swaps and Derivatives Association's template for CDS on ABS, has also increased the attraction of the trade.
The firm has not ruled out looking at the deals from the buy-side, but is more committed to structuring transactions.
