Collateralized debt obligation professionals are asking for greater transparency to help investors identify other participants in deals to make replacing CDO managers easier. One issue impeding the replacement process is the difficulty in finding out who the other investors are, because CDO trustees do not always release this information, noted David Tesher, managing director at Standard & Poor's in New York. Market participants need to work together to develop a more efficient process to bring investors together, instead of one party needing to take on the bulk of responsibility in mobilizing action on this issue, as is often the case now, he added.
Christopher O'Connor, v.p. at CDO managerPrudential, noted that only a few CDO managers have been successfully replaced. In many deals efforts to replace managers have been subjected to drawn out negotiations that have negatively impacted the performance of the deals, he explained. Reasons for replacing managers can range from underperformance, changes in personnel, communication failures or even managers getting out of the business, he said.
One attorney, however, noted that obtaining greater transparency on the issue may be complicated as other asset classes, such as bonds, do not offer any effective means of obtaining information on fellow investors. Bond transfer agents do not release information on bond holders and those seeking the names of investors can often only obtain this on an ad hoc anecdotal basis, he said.