Crédit Agricole Indosuez has started marketing a synthetic collateralized debt obligation referenced to convertible bonds. The CDO, dubbed Cabrio, will be EUR300-400 million (USD350-470 million), according to Loic Fery, managing director and global head of credit derivatives and structures in London. The CDO will lay off risk from CAI's convertible bond stripping desk (DW, 3/30).
Fery said initial reactions from investors have been favorable because the deal offers diversification and gives a pick up on corporate deals and offers access to a new asset class.
The CDO would diversify investors' portfolios because the reference entities Cabrio uses are not liquid in the default swap market and therefore not in many investment-grade corporate CDOs. These corporates include Lagardère, LaFarge and Pernod Ricard.
Cabrio also generates a higher spread. Fery estimated that the AAA tranche would price 10-15bps over a straight-forward synthetic CDO. The deal has a five year maturity, with a call at three years.
Separately, CAI is structuring the second of its asset-backed Triplas CDOs. Fery said the only major change is that this deal includes AA assets, which gives investors more yield and diversification.
