German bank IKB Deutsche Industriebank is hedging foreign exchange exposure on a EUR360 million collateralized loan obligation. The structure will feature a string of cross-currency asset swaps to hedge the currency mismatch between any non-euro assets in the investment portfolio and euro liabilities.
Bacchus 2006-1, an Irish special purpose vehicle, will enter into a swap with one or more counterparties each time a non-euro obligation is invested. A small bucket of the underlying senior and mezzanine loans and second lien loans can be denominated in non-euro currencies, as well as high yield debt and structured finance securities.
Roland Nolte, spokesman for IKB in Düsseldorf, did not return messages by press time and more details including swap counterparty could not be ascertained. JPMorgan has arranged the CLO and officials from the firm could not be reached by press time.
The structure is IKB's first arbitrage CLO, joining the bank's seven balance sheet structures, both cash and synthetic, currently under management. In addition, the bank is one of the largest CDO investors in Europe, according to dealers.
