“[STAM is] trying to position our firm as one of the most experienced collateral managers. And we definitely want to build different types of asset securitisation expertise for the firm,” Chong said. STAM is focusing on collateral management, credit research and structuring models, all of which it can conduct in-house.
In its effort to build a track record, STAM is currently working on several deals, both cash and synthetic, where it will act as collateral manager. Chong declined to comment on a planned synthetic CDO, but market sources said the transaction, worth about $440 million, will be referenced on a portfolio of credit default swaps with a majority of exposure on Asian credits. The transaction could be launched within the next two to three months and is being arranged by JP Morgan Chase.
But Chong said STAM still needs to address some issues such as documentation risk and accounting consolidation before offering any synthetic transactions to the market. “For us to be involved in synthetic structures, we have to address a lot of issues associated with the structure,” Chong said. “We want to make sure the SPV [special purpose vehicle] holding the assets is bankruptcy-remote and non-recourse financing,” Chong said. “We are still trying to look into it and trying to address whether there are still some accounting issues – eg, consolidation – that have not been addressed.”
Chong said STAM would be very selective and careful about the structures. “We want to make sure that all the issues, including counterparties risk, are properly addressed so that over the life of the transaction we don’t have any problem,” Chong said. “From our perspective, for deals that we manage, we also invest in a portion of the equity: so we definitely want to manage the risk,” said Chong.