HSBC will this month price a synthetic collateralized debt obligation which references U.K. commercial mortgage-backed debt; a first for the firm and a structure rarely seen in Europe. Until now, HSBC has not been a big player in securitization and has intermittently issued cash deals.
Rival officials say the firm is building up its ABS securitization business. "It is certainly looking to securitize much more off its own book," said one structurer at a U.S. house in London. In March, HSBC signed up Matthew Webster, head of real estate securitization at Hypo Real Estate Bank in London, to focus on CMBS. Webster is currently road showing the new synthetic CDO and could not be reached for comment. Other officials at the firm declined comment.
In the CDO, dubbed Nemus, investment is synthetically linked to a reference pool of 23 commercial mortgages on 272 properties in England and Scotland, which HSBC holds on its books. The firm will then enter into a credit-default swap with a special purpose vehicle which will in turn issue GBP179 million (USD 330 million) of floating-rate notes to investors. There are six tranches rated AAA to BB, including GBP35.7 million (USD65 million) of AAA rated notes.
The CDO is expected to price later this month. Target investors, notional and reasons for launching a synthetic rather than cash structure could not immediately be determined.
