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Derivatives

AXA Readies CDO With Increased Trading Capability

AXA Investment Managers will shortly bring to the market two collateralized debt obligations, each with a 20% discretionary trading bucket. The discretionary bucket in the upcoming deals allows AXA to make portfolio changes without having to justify the trades to the rating agencies. Usually, trades are only permitted if there is credit deterioration or improvement and have to be rubber stamped by the ratings agencies.Laurent Gueunier, head of investment-grade CDOs at AXA, declined to comment.

The synthetic deals, both called Overture, will total EUR3 billion (USD3.45 billion), 15% of which will be cash notes. One deal will be dollar-denominated the other will be euro-denominated.

CDOs generally have only one bank on a deal, but the Overture deals will have eight firms on the syndicate to give it global distribution. JPMorgan is the lead arranger. ABN AMRO will distribute the deal in the Benelux region, Bayerische Landesbank in Germany, CDC Ixis Capital Markets in France and Spain, DBS in Asia ex-Japan, Mizuho Securities in Japan and Wachovia Securities in the U.S.

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