Euro Zing I, a E260 million collateralized debt obligation using a dual currency asset and liability structure, was launched last week by the Dublin-based ZAIS Group. The deal, which is backed by sterling- and euro-denominated CDOs and various asset-backed securities, is thought to be the first to use a dual currency structure. Mirja Wenski, portfolio manager at ZAIS, says the firm used the dual currency structure to gain access to the sterling assets, which represent 35-40% of the European ABS market.
The CDO will offset the potential negative impact from foreign exchange exposure by issuing notes denominated in euros and in sterling. In addition, the manager will use swaps and options to hedge the transaction. The triple-A euro-denominated tranche was priced at 50 basis points over LIBOR, the triple-A sterling tranche at 55 over sterling LIBOR and the Aa3 euro tranche at EURIBOR plus 90 basis points.