Dealers Bid For CDO Portfolio...

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Dealers Bid For CDO Portfolio...

Credit derivatives dealers, including JPMorgan, BNP Paribas and Société Générale, are bidding for a portfolio of synthetic CDOs that Gen Re Securities has put on the block. The portfolio is believed to include a significant portion of deals that Gen Re purchased from Enron Credit following the energy company's collapse, according to a market official. Tim Frost, head of European credit derivatives at JPMorgan, declined comment. Le Liepvre Hubert, head of credit structuring at SocGen in Paris, declined to confirm or deny the move and Kate Webster, a spokeswoman at BNP in London, declined comment. Officials at Gen Re did not return repeated calls.

Prior to its parent company's precipitous demise last year, Enron Credit structured four privately placed arbitrage synthetic CDOs, named Osiris, Isis, Ra I and Ra II with a total notional size of around USD4.5 billion. The first deal, Osiris, was fully placed but Enron was unable to sell the sub investment grade tranches of the three follow up deals, according to two market officials. Gen Re is believed to have purchased a substantial number of the CDO tranches--between 50-70% according to one official--and is now looking to offload the deals because the firm is closing down. Enron Credit discussed using Bear Stearns as the placement agent to sell some of the equity tranches it retained, but it could not be determined by press time whether these discussions came to fruition or whether Gen Re took any of the equity pieces. Officials at Bear Stearns declined comment.

According to one insider, Enron Credit valued the synthetic CDO tranches in its credit portfolio at USD30-35 million but raised less than USD10 million on those it sold. Calls to Enron and PricewaterhouseCoopers, Enron Europe's administrator, were not returned by press time.

Gen Re was planning to issue its first synthetic CDO in the Asian market last year (DW, 9/24). It is unclear whether this deal closed.

 

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