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Derivatives

GEN RE To Test Asian CDO Mart

Gen Re Securities plans to complete its first synthetic collateralized debt obligation in Asia this month. The firm's first CDO for Asian investors will be referenced to a basket of U.S. and European names, according to Naoki Inoue, managing director and branch manager in Tokyo. He added it plans to structure a synthetic CDO referenced to Asian names within three months.

Gen Re will start with a deal referenced to U.S. and European underlyings because it has expertise in these markets and has structurers based in London, New York and Toronto. But, Inoue added, the terrorist attacks in the U.S. two weeks ago may cause credit spreads to widen, which would mean Gen Re Securities would put its plans for CDOs on hold.

Inoue declined comment on the sizes of the CDOs. Gen Re will first structure balance sheet oriented CDOs, then may consider arbitrage deals. In the arbitrage deals it would sell the equity component, said Inoue, declining to elaborate. Gen Re received a license to trade credit derivatives in Japan in April (DW, 3/25).

One market official in Tokyo said that while he considers Gen Re Securities to be a second tier player, if it becomes active in the CDO market this could lead to spreads narrowing. "In terms of volume we may be second tier, but in terms of quality, creative ideas and complex structures, we are very competitive," Inoue retorted.

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