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ABS CDOs Sprout Up In Asia

11 May 2003

Synthetic collateralized debt obligations referenced to asset-backed securities have recently arrived in Asia and several firms, including JPMorgan and BNP Paribas, are scrambling to close deals. "With spreads tight, investors have no choice but to think about new products," said Mahesh Bulchandani, managing director and head of structured credit products at JPMorgan in Tokyo. Bulchandani continued that the firm is hoping to complete the first synthetic CDO that combines both Japanese and Asian ABS underlying. The deal would likely be over USD500 million.

Investors looking at the deals include Kyobo Life Insurance and Singapore's United Overseas Bank. "This is something we're now reviewing," said Bum-Jun Lee, general manager of the fixed income department at Kyobo Life Insurance in Seoul. He continued that while the firm is open to such products, it needs to become more familiar with ABS in other countries before it considers plunging in.

For non-Japan Asia, BNP Paribas and Crédit Agricole Indosuez are believed to have kicked off the market by selling tranches of global portfolios. "This market is continuing to develop," said Pierre Trecourt, Asian head of credit derivatives structuring at CAI in Hong Kong, noting that the Asian market is following in the footsteps of Europe, where the product took hold last year. Trecourt continued that the majority of CAI's USD660 million CDO referenced to ABS, dubbed ABSolute, was placed in Asia (DW, 4/6).

Cedric Podevin, head of Asia ex-Japan credit structuring at BNP in Hong Kong, "I've been working on this full-time." The firm recently sold a USD100 million tranche, which Podevin described as a good start with plenty more in the pipeline.

11 May 2003