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“The evolution of CPDOs will likely follow what happened to CPPI and CDOs. You start with static deals and then you move to managed transactions. I think that will be the evolution”
Andrew Feachem, ABN Amro |
The hype around one of the latest structured credit product innovations is understandable given the substantial advantages that ABN Amro was able to offer investors with its €1 billion print of constant proportional dynamic obligations (CPDO). The deal, called Surf, offered buyers a highly attractive coupon of Libor plus 200 basis points and yet is triple-A rated.
It sounds almost too good to be true – maybe it is – but the rating agencies have signed off on this structure, which involves selling protection in the investment-grade iTraxx Europe and Dow Jones US CDX indices. These indices have rallied dramatically in recent weeks, the cause of which is generally attributed to some...
