HSBC is rolling out the latest in a series of leveraged super senior transactions it debuted last summer. The structure, dubbed Starts 2006-5, offers seven-year leveraged exposure to a static portfolio of 125, low investment-grade reference entities with an average rating of Baa2.
Leveraged super senior trades have become scarce on the ground this year because of the difficulties dealers face when hedging the highly leveraged exposure. "There is still certainly demand," said one structured credit official. Structurers from HSBC did not return calls by press time and motivations for the launch not could not be determined.
Like the previous HSBC Start issues, this transaction features time-dependent loss triggers, which force early unwind or additional note purchase by the investors when the accumulative annual portfolio default loss hits a set percentage. HSBC is issuing USD75 million of notes linked to the portfolio, which have been rated Aaa by Moody's Investors Service.
