Some signs of unwinding are already occurring. On November 23, ratings agency Moody’s downgraded a €11.5 million series of UBS CPDOs nine notches, from Ba2 to C. This was because the CPDOs hit their cash-out trigger, causing the deal to unwind, and resulting in an approximate 90% loss for investors.
Moody’s has also put five more series of UBS CPDOs, worth €340 million, under review for a possible downgrade. The rating agency said this is in response to the continuing spread widening and volatility of the financial names underlying these instruments, which is negatively affecting their net asset values.
The week on Risk.net, November 25-December 1, 2016Receive this by email