Morgan Stanley is structuring an innovative collateralized debt obligation that feature a five-year maturity, compared to the traditional 30-year norm. Leonard Brous, executive director and product manager at Morgan Stanley in New York, said a typical synthetic CDO with an underlying asset-backed portfolio has a 30-year maturity. This does not appeal to shorter-term investors, which is why the firm is structuring the second transaction in its Constant Recovery Diversified Synthetic (CoRDS) program with a shorter lifespan to appeal to investors with maturity constraints.
The transaction's underlying collateral will consist of 85% in ABS and 15% in corporate credit, Brous said. The first CoRDS transaction, a $1 billion, 10-year CDO, was completed last month.