04 May 2004, Nick Sawyer, Risk magazine
Despite a tightening in global credit default spreads over the last year, there is still strong demand for structured credit investments from cash rich Asian clients – although many are looking to move further down the ratings curve to earn a pick–up in yield, says David Crammond, head of structured credit sales, Asia-Pacific, at ABN Amro in Singapore.
“There are investors that normally have been AA or A buyers that are looking at BBB right now,” he says. “I think a lot of people have re-adjusted their expectations on yield. But I actually think yield in the equity tranche are quite attractive now.”
ABN Amro’s latest deal follows the launch of a single-tranche synthetic CDO for a Chinese financial institution early last month, the bank’s first CDO deal for a Mainland Chinese investor.
The deal, issued through the bank’s special purpose vehicle programme Chess II, was referenced to 100 investment grade names with a notional value of $1.8 billion. The Chinese investor – also not named by ABN Amro – invested in a $50 million note rated AA- by Standard & Poor’s. Around 5% of the names in the portfolio were Asian, with the rest split more or less evenly between the US and Europe.
“We're pretty bullish about the opportunities in China going forward,” says Crammond. “This was our first deal on the Mainland, and we really think the environment is very good for CDOs.”
The bank is also working with a number of other Asian clients, with a couple of deals, including a CDO of CDOs, in the works.