Standard & Poor's is putting together a study of recovery rates in European collateralized debt obligations that have suffered a credit event in the underlying collateral, such as a downgrade, or a default. The new publication should be ready in a few months, according to an official at the rating agency. The study will compare the recovery levels for different CDOs based on their underlying assets. The ability to recoup losses is not always in a collateral manager's hands, notes the official. Some managers may be forced sellers of a credit on the way down, whereas others have the leeway to hold on and make up losses.
S&P is also about to release a performance indicator for European synthetic collateralized debt obligations. The indicator will be similar to an existing one used to track U.S. cash CDOs, called Rated Overcollateralization, or ROC. The idea behind the new indicator is to give a straightforward view of the synthetic market's performance (BW, 9/29).