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The Royal Bank of Scotland is in the process of establishing its first Chinese mainland-based office and is looking to place derivatives marketers onshore within a year. "This is for strategic positioning," said Anthony Yuen, managing director and Asia Pacific regional head in Hong Kong. The branch in Shanghai should be open within six months. After installing a skeleton crew to meet regulatory requirements, such as a financial controller and auditors, Yuen noted that the bank will place derivative marketers for non-renminbi products onshore. Currently, coverage of mainland China is handled out of its Hong Kong office.

The Royal Bank of Scotland last week hired Celia Rountree, v.p. in dollar-bloc fixed income sales at the Royal Bank of Canada in London, in a new role as a senior saleswoman for Asia Pacific in Melbourne. "I'm thrilled to be back home," said Rountree, an Australian native. She has been given a broad mandate for the Australasian region to market primarily non-Australian dollar fixed income products ranging from government bonds to structured credit notes. She now reports to Robert Edgely, Asia Pacific head of sales in Melbourne, who did not return calls.

Schroder Investment Management is marketing a relative-value fund, structured with derivatives, in which investors win even if both equity baskets tank. The fund is thought to be the first of its kind because previous relative-value funds have required investors to pick a basket which increases in value more than another, whereas in this fund the investor still wins if both baskets suffer a negative performance as long as the favored basket falls by less, according to John McLaughlin, head of the structured investment team in London.

David Schwartz, a researcher of collateralized debt obligations at Morgan Stanley in New York, has left the firm. Schwartz researched synthetic CDOs, as well as structures backed by asset-backed securities and real estate, according to an official in New York.

Société Générale is structuring what is thought to be the first synthetic collateralized debt obligation referenced to high-yield corporates. The deal references a pool of 70 North American corporates rated B plus to BBB plus. Synthetic high-yield deals have not been done before because the credit derivatives universe is predominately investment grade and there is little liquidity in the high-yield sector, according to an investor. An official at SG, however, said it can use correlated products such as bonds and equities if liquidity in a name completely dries up.

"The debate comes down to whether this is a death contract or a deterioration contract." --Mark Timmis, director and head of credit derivatives trading at Credit Suisse First Boston in London, on the debate over including restructuring as a credit event. For complete story, click here.

The transactions described in Part I centered around issuers seeking to improve their capital ratios without exposing potential investors to the typical risks of an investment in capital securities. The first example discussed in Part II involves a transaction in which a senior unsecured creditor achieves a preferred position against other senior unsecured creditors, without taking collateral from the borrower.

Credit-default swaps spreads on Volkswagen widened about 10 basis points ahead of the company's EUR4.5 billion (USD5.1 billion) bond offering, with trading remaining volatile as the company increased the size of the deal before pricing. Traders said swaps were trading at about 53 basis points two weeks ago and as the deal was announced began to inch out. On Monday, spreads widened to 75 basis points from the low 60s, traders said. "Before the deal priced [on Tuesday], the spreads bounced around, especially when the size of the deal changed," noted one trader. The initial size of the offering was EUR3 billion and at one time during the pricing it looked like it was going to be increased to as much as EUR5 billion, traders said.

Credit derivatives and CDO professionals gathered at New York's Metropolitan Hotel last week for the Strategic Research Institute's 6th Annual Combined Summit on CDOs & Credit Derivatives. Senior Reporter, Karen Brettell, filed the following stories:

Synthetic collateralized debt obligations have borrowed a lot of technology from their cash equivalents, but there is still more to learn, according to conference attendees.

Wachovia Securities has hired five professionals to work in structured credit sales, which includes synthetic collateralized debt obligations and plans to make further appointments in its London office. The hires have been made to support growth in the firm's global product origination business, according to John FitzHugh and Walter Dolhare, managing directors and co-heads of global structured products sales in Charlotte, N.C., to whom the new hires report.

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