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CIBC World Markets is structuring a synthetic collateralized debt obligation that market officials said would resemble the firm's first CDO, Imperial 1, which it issued in December (DW, 12/8). The firm is planning to issue the CDO before the end of the first quarter, said one market official.

The increase in the number and scope of CDO downgrades highlights the need for investors to understand how CDOs are evaluated in stressful environments. The purpose of this article is to describe Fitch Ratings' approach to evaluation of its ratings of CDOs in light of changing market conditions. The article will not address the reasons underlying the defaults and downgrades of corporates and sovereigns.

Verspieren, the third biggest direct insurance broker in France, has teamed up with weather derivatives broker United-Indar to offer weather derivatives in Europe. Thierry Bizdikian, chief executive of the commercial division of Verspieren in Paris, said the insurance broker wants to expand its market reach by adding the ability to offer weather derivatives. It already has several clients, including industrial and construction concerns, which are interested in the products, he added, declining to name them.

Isreal plans to create a risk and liability management office within the Ministry of Finance in the coming months and as a result will boost its use of over-the-counter derivatives, according to Arnon Ikan, senior director for foreign currency transactions in Jerusalem. The country has only used a handful of interest-rate swaps to date.

Ivy Asset Management, a fund of hedge funds asset manager in Garden City, N.Y. with more than USD5 billion in assets, has hired Anil Babbar, former fixed-income structurer at ING Barings in New York and Hong Kong. Ivy made the hire to develop structured products, which relate to the firm's principal-protected notes and leveraged offering business, according to Babbar, who declined to detail the products. He joins a six-member team.

JPMorgan is working toward setting up its first prime brokerage desk in London and New York. The desk will start by offering total-return swaps, dubbed Prime Swap, in which hedge funds can pay or receive baskets of assets in return for a LIBOR-based rate, according to Christian Dalban, European head of equity and equity derivatives trading in London.

Lehman Brothers is considering setting up an interest-rate and equity derivatives operation in Korea because of planned changes to the Securities and Exchange Act in July. The firm, which has an investment banking operation in Seoul and runs an offshore Korean trading book from Tokyo and Hong Kong, plans to make the push on the back of establishing a branch in Seoul. "We [expect to] receive a branch license in March and expect trading to begin shortly thereafter," said David Kim, managing director of the financial institutions group at Lehman in Seoul. Kim will be responsible for the cash equity and fixed-income products.

Alastair Cooper, managing director and head of equity derivatives sales at Morgan Stanley in London, has left the firm. Cooper has been replaced by Tom Levy, head of program trading, according to Andrea Bothamley, spokeswoman. Levy, who will keep his previous responsibilities, did not return calls.

Nationwide Building Society, the largest U.K. thrift with more than GBP75 billion (USD107 billion) in assets, is looking to hire four derivatives-savvy professionals for its treasury department as it continues to increase its assets and therefore increase its risk management activities. The company is looking to hire a head of treasury risk to manage the GBP30 billion the department oversees.

Fitch Ratings, Moody's Investors Service and Standard & Poor's are planning to allow investment vehicles set up by banks and fund managers, known as structured investment vehicles or SIVs, to sell credit-default swaps for the first time. SIVs can only invest in instruments approved by the rating agencies. The rating agencies are taking this initiative now because liquidity in credit-default swaps is improving and because capital adequacy, settlement and documentation issues relevant to SIVs have been ironed out, according to Serj Walia, associate director in structured finance at S&P in London. The development is significant because some USD80 billion is invested in SIVs.

Scholastic Corp., a children's book publishing company in New York, has entered an interest-rate swap on the back of a USD300 million bond offering it issued last month. Vinnie Marizano, company treasurer, said the swap was used to convert the 5.75% coupon on the bond into a floating-rate liability. He added that the swap was included as part of the offering and executed simultaneously.

RBC Capital Markets is merging its cash and synthetic investment grade credit business in response to convergence between the two markets, according to Walter Gontarek, head of global credit products in London. "The merger of these businesses is in response to investor demand for one-stop credit products shopping and the need to manage cash and synthetic credit liabilities under one management structure," Gontarek added. RBC's global credit products unit will now handle synthetic investment grade credit risk in loan trading, corporate bonds, credit derivatives and synthetic collateralized debt obligations.