Forward-Starting Synthetic CDOs Pick Up Spreads

U.S. credit structurers are pitching forward-starting synthetic collateralized debt obligations to pick up spreads in a tight credit spread environment.

  • 27 Jan 2006
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U.S. credit structurers are pitching forward-starting synthetic collateralized debt obligations to pick up spreads in a tight credit spread environment.

The credit curve of a forward-starting five-year structure is steeper than that of a current five-year trade of the same rating because it forecasts an increase in default rates and so pays a higher spread. "It's hard to generalize about the level of pickup," said Oliver Dunsche, director and head of credit derivatives structuring at Barclays Capital in New York. But structurers said a five-year CDO starting two years out can pick up about 15 to 20 basis points spread relative to a similar deal starting immediately, depending on the portfolio.

"They're interesting trades," said one U.S. structurer. "They allow investors to take a view on the timing of defaults and the pricing and risk profile can be attractive for certain managers or investors who want to implement that view." The structures have already seen interest in Europe, where several fund managers have expressed interest, including Solent Capital Partners (DW, 11/11) and Fisher Francis Trees & Watts (DW, 12/9).

  • 27 Jan 2006

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 329,208.56 1277 8.09%
2 JPMorgan 321,584.64 1392 7.90%
3 Bank of America Merrill Lynch 296,878.25 1014 7.29%
4 Barclays 249,463.73 926 6.13%
5 Goldman Sachs 218,838.41 733 5.38%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
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1 BNP Paribas 46,136.68 182 7.00%
2 JPMorgan 44,545.29 93 6.76%
3 UniCredit 35,639.50 153 5.41%
4 Credit Agricole CIB 33,211.72 160 5.04%
5 SG Corporate & Investment Banking 32,419.80 126 4.92%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
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1 JPMorgan 13,755.50 61 8.94%
2 Goldman Sachs 13,469.15 66 8.76%
3 Citi 9,716.40 55 6.32%
4 Morgan Stanley 8,471.86 53 5.51%
5 UBS 8,248.12 34 5.36%