Duke Funding Management, the collateralized debt obligation arm of USD17.5 billion Ellington Management Group, is managing its second hybrid synthetic CDO. The USD1.2 billion deal, called Duke Funding X, consists of 80% credit-default swaps on prime and sub-prime residential mortgage-backed securities and the rest in cash securities.
The structure and collateral are identical to Duke Funding IX, which was issued last fall, except that the previous deal was USD2.5 billion and included 72% CDS. Nathan Flanders, senior director at Fitch Ratings in New York, said the 2006 International Swaps and Derivatives Association's Pay-As-You-Go template has contributed to greater manager and investor comfort with synthetic RMBS and consequently increased exposure in recent deals (DW, 5/15). The previous eight Duke deals as well as the manager's other three CDOs all are cash.
Richard Daley, portfolio manager for the deal, did not immediately return a phone call and officials at UBS, which structured the deal, could not immediately be reached.
