Cheyne Capital Management plans to set up an asset-backed securities desk that will issue cash and synthetic collateralized debt obligations and has hired Abbey National Treasury Services credit veterans Adrian Mallinson, structurer, and Syd Hanna, marketer, to spearhead the effort. Cheyne Capital is already one of the largest CDO managers and runs five CDOs totaling around USD8.5 billion. Officials at Cheyne declined comment.
At Abbey, Mallinson was responsible for structuring a USD10 billion synthetic CDO, dubbed Fulbeck Funding, which was the first synthetic securities arbitrage program. Both Mallinson and Hanna left Abbey as part of its reduction of wholesale banking services, according to a firm official. At Cheyne, Mallinson and Hanna will be part of the credit derivatives team.
One CDO structurer said Cheyne is likely to take the ABS-referenced CDO market by storm, noting that when founders Jonathan Lourie and Stuart Fiertz put their name to something, they do it well. For example, Cheyne started managing synthetic CDOs last summer and has issued three deals, none of which have been downgraded. In addition, the coverage ratios have also held up or improved, despite harsh credit conditions.
The asset manager's track record and infrastructure allow it to turn its attention to the ABS world, according to market officials. In addition, the tightening of corporate credit spreads and relative stability of defaults and recoveries in ABS make it attractive now.
