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Bear Stearns Combines Cash Flow, Synthetic CDO Groups


Bear Stearns has reconfigured its collateralized debt obligation underwriting operations by moving its synthetic CDO bankers out of the credit derivatives group and into the cash flow CDO group. A senior CDO banker at the firm says the merger of the synthetic and cash flow groups is designed to avoid double pitching of CDO deals by two separate teams of bankers to the same collateral managers. Senior managing director Lesley Goldwasser will oversee both synthetic and cash flow CDO originations, the banker says.

Another aspect of the move is that synthetic CDOs are becoming more and more actively managed and the same collateral managers, or clients of the bank, routinely manage deals that can be alternatively cash flow-based or synthetic in structure. Similarly, the same CDO deal may be hybrid and combine both technologies, requiring synthetic and cash flow bankers to work together.

A senior CDO banker at Bear Stearns says six synthetic CDO bankers, specializing in origination, have been reassigned to the cash flow CDO group headed by Goldwasser. The bankers, whose names could not be determined by presstime, had reported to Peter Croncota and Anthony Liberatore, senior managing directors and the heads of the credit derivatives group's sales effort. Croncota referred calls to Goldwasser, who declined comment. Liberatore referred calls to Russell Sherman, a firm spokesman. Wendy De Monchaux, senior managing director and head of credit derivatives, did not return calls.

The recent change at Bear Stearns reflects a growing trend on Wall Street in which CDO structuring, trading and sales are being handled under one umbrella, says a banker at Banc of America Securities. He adds that his firm has operated this way since the inception of its credit structured products group and says that, to his knowledge, only two banks have kept their cash flow and synthetic CDO operations separate, citing Deutsche Bank and Credit Suisse First Boston. Michael Herzig, head of CDO distribution at DB and Chris Ricciardi, head of structured credit products at CSFB, did not return calls.

Nik Khakee, director at Standard & Poor's, says the restructuring makes sense, and that his own rating agency recently reconfigured its staff in a similar way, largely because collateral managers are getting more comfortable managing active pools of synthetic deals.

Bear Stearns ranked third, behind Credit Suisse First Boston and Deutsche Bank, in the CDO underwriting league tables published by MCM, with $5.49 billion in 2001 and a 10% market share.

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