Standard Chartered Bank plans to structure its first synthetic collateralized debt obligation in next two to three months. The bank has been speaking with a number of investors in Asia and will look to close a deal referenced to mainly Asian credits, according to investors familiar with the transaction. The motivation is to reduce risk on the company's balance sheet. "This is a priority for the bank," noted one market official. Officials at the bank declined comment.
A fund manager in Asia said the CDO will be between USD100-200 million and referenced to 20-30 Asian credits. Each name will account for around USD5 million. However, a fund manager added, "The deal is still in the infancy stage."
The portfolio will likely consist of the most liquid Asian, Japanese and Australian credits. Investors will be able to buy into the deal through an equity tranche, mezzanine notes or the super senior credit-default swap. Market officials noted that with a synthetic CDO structure, the bank will be able to transfer credit risk from its loan book.
