HVB Credit Advisors, a Dublin-based collateralized debt obligation manager, is road showing a transaction which packages various levels of exposure to equity risk. Combinations of principal-at-risk and coupon-at-risk notes are being offered to investors. Officials at HVB could not be reached, but an insider said the CDO aims to meet investor demand for highly-rated structures which access more spread, coupled with a manager to juice up returns.
In the structure, investors' principal and the payments on the notes are either both linked to AAA tranches, both linked to a piece further down the capital structure such as equity, or just the note coupons can be linked to a lower-rated slice. The underlying portfolio comprises investment-grade corporates. "There is a lot more value in equity than anywhere else in the capital structure," said the official, adding this deal gives the option of tapping into that risk.
Dubbed Keltic II, it is HVB's second synthetic deal. It is arranged by RBC Capital Markets and is expected to close in late August. RBC Officials declined to comment before the final pricing and target notional and investors could not be determined.
