NIBC Credit Management, a USD5.4 billion portfolio manager, is managing its first hybrid collateralized debt obligation. The USD1.3 billion deal, called Orion 2006-1, is the Greenwich, Conn., firm's fourth CDO under management, but its first referencing synthetic collateral.
Orion will consist of 72% credit-default swaps on primarily investment-grade residential mortgage-backed securities and the rest in cash securities. It is expected to close the end of May. The CDS contracts are structured under the recently released 2006 International Swaps and Derivatives Association Pay As You Go template. Alex Stetkevych, senior portfolio manager for CDOs at NIBC, was traveling and could not be reached for comment. Ally Chow, head of structured credit management and syndicate at Calyon, which structured the deal, declined comment.
Jeffrey Berkes and Nathan Flanders, analysts at Fitch Ratings in New York, said Orion is structured similarly to other hybrid deals, but is interesting because it represents a market move toward hybrid structures. "More traditional cash deals are increasing synthetic buckets," Berkes said. "Investors on the sidelines and asset managers waiting to see how the mechanisms work are becoming more comfortable with hybrid structures."