Escape hatch
A number of monolines have commuted collateralised debt obligation hedges transacted with counterparties in recent months, in order to reduce exposures and free capital. Will this draw a line under the monolines' troubles? By Radi Khasawneh
Monolines have had enough. After months of writedowns, downgrades and emergency capital raisings, there has been a sudden rush by monoline insurers to commute insurance wraps on collateralised debt obligations of asset-backed securities (CDOs of ABSs), along with credit default swap (CDS) hedges with bank counterparties. In doing so, financial guarantors are able to reduce exposures to US residential mortgages, free reserves and improve their capital adequacy position - steps that, for some
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