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Abbey National Enters USD1.5B Credit-Default Swap

13 May 2001

Abbey National Financial Products has entered a 10-year USD1.5 billion (notional) credit-default swap with a special purpose vehicle sponsored by Abbey National. The SPV, named Marylebone Road CBO 2, entered the swap as part of a synthetic collateralized debt obligation it issued recently. The CDO was brought to market by Bear Stearns.

In the transaction Marylebone Road CBO 2 pays a periodic fee to Abbey National FP and in return will reimburse the SPV for any losses incurred in the reference pool up to an unspecified maximum amount, according to Jeffrey Tolk, v.p., senior credit officer in the structured finance group at Moody's Investors Service in New York. Moody's rated the CBO.

Tim Rigby, a credit derivatives structurer at Abbey National in London, said the bank is known as an investor in a number of different asset classes, and entering into a credit default swap now is "a natural way of expanding our appetite in investment-grade corporate credit risk."

13 May 2001