Search results for

Babcock & Brown, a boutique investment bank specializing in asset aquisition and corporate financing strategies, plans to stage its debut in the structured credit arena by launching a static synthetic collateralized debt obligation with a twist. Richard Griffin, head of capital markets product development in San Francisco, said the product will be referenced to a global pool of 50-100 default swaps, but will contain embedded event protection against risks as diverse as corporate frauds, terrorist acts and natural catastrophies.

Citigroup has added Robert Toorman, cash and credit derivatives sales to the Netherlands at Deutsche Bank in London, for its European credit sales team. Toorman reports to John Colligan, head of European credit sales. Annemarie Quill, spokeswoman for Citigroup, confirmed the move. Toorman did not returns calls and Colligan referred calls to Quill.

Replacing managers of underperforming CDOs is not always effective, as managers taking over deals often find themselves bound to pre-existing asset allocations, according to Kingman Penniman, president of KDP Investment Advisors. In many deals the securities must be deemed as a credit risk for them to be sold, which translates as requiring that they have already been downgraded. This makes it difficult to come in as a new manager and trade out of bad assets.

Deutsche Bank is in the process of marketing a structured product that gives German investors exposure to a fund of hedge funds. Johan Groothaert, global head of structured products sales and origination in London, said the product is novel because the firm is using FERI Trust, an independent German fund rater, to select the managed accounts. Jean-Marie Barreau, head of structured derivatives on managed assets in London, added that FERI will select funds with diverse strategies including long/short equity, market neutral, risk arbitrage and convertible arbitrage. The product is being sold primarily to family offices and high-net-worth individuals, Groothaert noted.

Citigroup Global Markets has brought to market a collateralized debt obligation giving equity holders prime voting rights for the potential substitution of the CDO manager, a move designed to avoid the threat of consolidating the CDO's assets and liabilities on its balance sheet. Speaking at the 6th Annual CDOs and Credit Derivatives Conference in New York last Wednesday, Amanda Angelini, v.p. at Citigroup, said the structure was created after conversations with the firm's accounting counsel as a means of sidestepping the threat of CDO consolidation under a recent Financial Accounting Standards Board rule.

Deutsche Bank has added five marketers to its equity structured product sales team in London--three of which are joining in new roles. The hires are on the back of increased revenues, according to a firm official.

Dollar/yen implied volatility shot up last week to 10.8% Wednesday from 9.45% Monday as investors bought a slew of one-to-three month dollar puts/yen calls as the yen strengthened against the greenback. Traders said a variety of investors, from hedge funds to banks, bought dollar puts/yen calls at strikes from JPY115 to JPY111 at spot levels of approximately JPY116-116.50. Dollar/yen spot was trading at JPY117.21 Monday and reached JPY115.94 Thursday.

Credit derivatives practitioners will likely add forwards on credit-default swaps to their product list early next year, according to Paul Lewitt, global head of credit flow trading at Dresdner Kleinwort Wasserstein in London. This will enable derivatives houses to hedge maturity mismatches in their portfolios.

Derivatives houses, including Citigroup, Barclays Capital and Deutsche Bank, are pitching receiver trades that take advantage of the steep euro yield curve between the three-month and the four-year portion. Many hedge fund accounts have already taken advantage of this steep curve and have scooped up such trades as two year into two year receiver options, in which the investor enters an option to receive two-year fixed and pays floating, said Jean Dumas, head of European relative value research at Deutsche Bank in London.

General Electric Capital Corp., the financial services arm of General Electric, has entered an interest rate swap to convert part of a recent USD2 billion fixed-rate note sale into a synthetic floating-rate liability. Peter Stack, spokesman in Fairfield, Conn., said the corporate periodically enters interest rate swaps to maintain a match between its fixed- and floating-rate assets and liabilities. He declined to specify what portion of the five-year note sale constituted the exchange, or what rate the electric giant paid or received.

Bank Nederlandse Gemeenten, a Dutch public sector finance agency, has entered swaps on two recent bond deals to convert them into euro-denominated floating rate liabilities. The agency entered a cross-currency interest rate swap on a CHF300 million (USD228.52 million) bond and an interest rate swap on a EUR150 million (USD173 million) issue. Bianca Ydema, senior manager in capital markets in the Haag, Netherlands, said it is the agency's policy to convert fixed-rate issues into floating-rate liabilities and any foreign currency into euros, its domestic currency. Interest rate risk is managed separately, Ydema explained.

Credit-default swaps referenced to Hong Kong's Hutchison Whampoa widened last week on the back of a surprise announcement that it was re-tapping the debt market. Sonia Lee, v.p. and Asian credit trader at Credit Lyonnais said last Tuesday five-year credit protection widened to 160-170 basis points from 140-150bps on the back of the news. Volumes in Hutchison protection doubled to a total of USD50 million (notional) a day.