RBC Capital Markets has structured a synthetic collateralized debt obligation to hedge a $2 billion portfolio of U.S. asset-backed securities. RBC is marketing the CDO to investors globally and will also act as trade manager. The firm has the right to add new assets or make substitutions during set periods to maintain the portfolio amount of $2 billion. The deal is expected to be priced this month and closed in mid-September.Walter Gontarek, managing director and head of global credit products at RBC in London, declined to comment.
The $157.8 million, multiple tranche transaction will reference a minimum of 70% AAA-rated ABS, with the remainder rated at least A. The portfolio is expected to comprise more than 70 obligations, including collateralized loan obligations, mortgage-backed securities and home equity.
Standard & Poor's has assigned a preliminary rating of AAA to the CDO's super senior tranche, AA+ to the mezzanine and AA- to the first loss basket.