Goldman Sachs is readying a slew of managed single tranche transactions for the U.S., many of which will include limited substitution of credit rights. Eric Bothwell, v.p. in credit derivatives and portfolio credit in New York, explained the deals are being prepared to satiate demand from credit players, including insurers and hedge funds, to sell investment grade credit protection. Single tranche deals are attractive due to their ability to be customized for individual clients. Particularly, by offering credit substitution rights, sellers of protection will be able to replace credits they consider to be at a high risk of defaulting, which has become an increasing concern due to the number of recent defaults, noted Bothwell.
Goldman has several transactions in the works, but Bothwell was unable to specify how many deals the firm is likely to price in the coming weeks. Each tranche will represent a notional value of USD10-USD40 million.
