RBC Tests Synthetic Asset-Backed CDOs
RBC Capital Markets is marketing globally its first hybrid and first fully synthetic asset-backed securities collateralized debt obligations.
RBC Capital Markets is marketing globally its first hybrid and first fully synthetic asset-backed securities collateralized debt obligations. Both are full-capital-structure cash-flow CDOs.
The synthetic deal, called ABCDS 2006-1, consists of 100% credit-default swaps on mezzanine U.S. residential mortgage-backed securities. It is about 70% ramped and is expected to price next week at about USD400 million. ABCDS is being structured in London and managed by AllianceBernstein in New York. Rob Pomphrett, head of structured product syndicate at RBC in London, said the bank chose to partner with AllianceBernstein because of the manager's research-driven defensive strategy.
The hybrid deal, called Longport III, references a similar portfolio but allows for a 40% cash bucket. It will be managed by Philadelphia-based Delaware Investment Advisors, which also managed cash deals Longport I and II. Pomphrett expects to launch Longport III's equity tranche next week and to price the rest of the USD750 million CDO by the end of February. He said RBC chose to use synthetic ABS because of the growth of that market and because it is more efficient to structure deals using synthetic rather than cash ABS collateral.
Separately, RBC and UBS Global Asset Management are marketing globally a multi-currency synthetic investment-grade corporate collateralized debt obligation. The deal, called Corinthian, consists of 140 primarily investment-grade names. USD115 million has printed so far and Pomphrett declined comment on how much he expects to print in coming months.