US investment bank Morgan Stanley is arranging a €4 billion plus synthetic collateralised debt obligation (CDO) due to be managed by London-based investment boutique Cheyne Capital Management.The CDO is unusual as it is one of the largest this year, containing an equity portion of about €100 million. It will need to be very well diversified, said a credit structurer at a rival investment bank.
“It’s a big job for two young guys,” said another, referring to John Weiss and David Peacock that Cheyne recently hired from Goldman Sachs. But Peacock and Weiss will draw on Cheyne's existing expertise in the area - the investment boutique has been active in two other large CDO issues.
The mezzanine tranche A to BBB will also be worth around $100 million, with the remainder AAA investment grade. Demand for the CDO, based on about 290 reference credit default swaps, should prove a bell-weather for the CDO market, hit by a reduction in investor appetite to pick up equity and mezzanine tranches in the past 18 months.
Deutsche Bank research pointed to a fall in the overall CDO market last year, but European CDO issuance continued growing.
However, Cheyne has already lined up investors for the equity portion, bankers said, and is awaiting credit ratings on the structure.
Cheyne is a spin-off from Morgan Stanley and employs a number of ex-Morgan Stanley asset managers, in addition to Weiss and Peacock.
Topics: Cheyne Capital Management
More on Credit Derivatives
Clearing credit hub closes, with Markit citing disappointing Sef volumes
UBS in Australia sold off CDS portfolio in fixed income scale-back
Fears relationship between credit indexes and constituents becoming more tenuous
A new product could smoothe the gap between capital and accounting rules
Sign up for Risk.net email alerts
Nominated for two technology awards
Nominated for post trade technology award
Sponsored webinar: Collateral and counterparty tracking
Isda directors warn on fragmentation, access and liquidity - but expect problems to pass
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.