The South African Development Bank is preparing a collateralized debt obligation backed by municipal bonds. The deal will be about R2 billion ($275.8 million) and is being created as part of the bank's plans to promote South Africa's municipal bond market, says Grant Scott, a securitization banker at Rand Merchant Bank, which is lead managing the deal. Scott emphasized the deal is in the early stages and a launch date has not been set.
The municipal bonds are part of the development bank's treasury portfolio and will be bundled into a CDO to allow investors to gain exposure to the asset class in a structured way. This will be Rand Merchant Bank's second CDO. Its first, Fresco, was priced last year.
Rand Merchant Bank has also just launched its first commercial paper conduit, Indwa. It is R3 billion ($413.8 million) with the ability to go up to R15 billion. The conduit buys a number of different assets including structured notes, credit default swaps, loans and financial assets.