Daiwa Securities America, the wholly owned subsidiary of Daiwa Securities in New York, is planning a return to the synthetic collateralized debt obligation market after a more than three-year absence. Hiroyuki Nomura, senior v.p. in structured finance, said the firm would look to both structure and invest in synthetic CDOs. Market officials estimated this could happen as early as the fourth quarter but Nomura declined comment on this point.
Daiwa structured its only previous synthetic deal early in 1999 but was forced to abandon the synthetic market shortly afterward because capital for new deals disappeared in the wake of the Russian debt crisis. "We committed our own capital in 1999. But soon after the impact of the Russian crisis caused all the capital to dry up on Wall Street," Nomura said. However, a market official familiar with the deal, said, Daiwa bought the equity portion of the CDO because investors refused to take on the equity risk. Nomura said it was able to close the deal but declined comment on whether it bought the equity tranche.
Nomura declined to detail its structure. Daiwa is eyeing a return to the market now because its Japanese institutional clients have begun showing a renewed interest in investing in synthetic products, Nomura said. "We are very assured many Japanese investors are interested in the market," he added.
Nomura said Daiwa's investor base has become more attracted to the synthetic CDO market because it has observed an increase in the number of bulge-bracket firms that have structured new deals.
