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Derivatives

JPMorgan, Cheyne Pitch Novel Capital-Protected CDO

JPMorgan and Cheyne Capital Management are pitching a first-of-a-kind collateralized debt obligation with capital protection.

JPMorgan and Cheyne Capital Management are pitching a first-of-a-kind collateralized debt obligation with capital protection. Capital-protected credit tranches have proved popular in Asia and Europe in recent months (DW, 7/1), but this is believed to be the first deal to combine more than one tranche.

Officials say the deal, managed by Cheyne, uses a variation of constant proportion portfolio insurance known as synthetic portfolio insurance to protect capital invested. The precise details of the capital protection method and the potential size of the deal could not be determined by press time.

One investor who has been marketed the structure said it consists of a long equity tranche and a short mezzanine tranche on different managed portfolios. Officials at Cheyne and JPMorgan in London declined comment.

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