BNP Paribas has started marketing hybrid synthetic collateralized debt obligations, such as CDOs of structured credit products, to clients in Japan and expects to issue its first deal in the coming months. "It's natural to have more structured products. The first stage was synthetic CDOs, the second stage is CDOs of CDOs," explained Go Yajima, senior structurer in Tokyo. "The market is getting used to new ideas."
The French bank has started marketing several structures to domestic clients, which will likely be around the same size as its recent JPY182 billion (USD1.36 billion) Serena Finance Series 2 CDO, which the firm placed privately two weeks ago. "It's the biggest Japanese synthetic CDO in the market," said Stephan Delacote, head of credit derivatives in Tokyo, commenting on the recent deal. Click here to see an indicative term sheet.
The hybrid CDOs will be denominated in either yen or U.S. dollars. The underlying will include asset-based securities, synthetic CDOs and bonds. The CDOs may include BNP's Serena Finance CDOs, noted Yajima.
A rival structurer noted that CDOs of CDOs are a natural development. "It allows you to become diversified at the highest level, in the same sense as a fund of hedge funds." He continued that there will likely be demand for such products in Japan because "Japanese investors are always interested in new products and developments."
Click here to download the term sheet in PDF format.
