Grand Cathay Securities, a securities house in Taipei, is planing to make its first investment in synthetic collateralized debt obligations and first-to-default baskets in the coming months. It is also looking for firms to structure credit-linked notes, which it can then sell to its clients. Amy Chang, head of fixed-income, said the securities house is considering investing more than USD20 million in the instruments to boost the return of its USD60 million fixed-income portfolio. Bankers are eager to get the business. "I'm very keen to give them a call now," said one credit derivatives marketer.
Grand Cathay currently has about USD12 million in credit-linked notes and is looking at making the jump now because its current CLNs are approaching maturity and the proceeds will need to be reinvested. The remainder of the funds will come from other portfolios. Any CDO investment is likely to be referenced to a U.S. portfolio and rated at least single A.
Separately, the securities house is preparing to market credit-linked notes to its customers. "Our clients want a large return," said Chang, adding that the firm is looking to purchase the notes from international houses and distribute them to its own client base. Grand Cathay is taking with Credit Suisse First Boston, Deutsche Bank and UBS Warburg about the project. Pricing and the attractiveness of the structure are the most important factors, said Chang. Josephine Lee, spokeswoman at CSFB did not return calls. Prakash Krishnan, spokesman at Deutsche Bank and Mark Panday, spokesman at UBS, declined comment.