German contagion looms as funds buckle

Frankfurt-Trust Asset Management, the collateralised loan obligation (CLO) equity investor, has suspended redemptions to its investors in the FT-ABS plus fund. That development is all the more worrying because the Frankfurt based CLO investor cites the US subprime mortgage crisis as having a negative impact on pricing and investor sentiment.

The manager is not the first to suspend redemptions as investors seek exits, with Union Investment Management suspending redemptions on its ABS-Invest fund. The manager had claimed to have less than 6% exposure to US subprime asset-backed securities (ABS), while Frankfurt-Trust also claimed to have minimal exposure to those assets.

This comes in the wake of the crisis at IKB Deutsche Industriebank, whose state-backed 40% shareholder KfW recently intervened to provide for IKB’s ABS conduit, Rhineland Funding on July 20. That development prompted the resignation of Stefan Ortseifen, chief executive of IKB.

KfW has guaranteed an €8.1 billion liquidity line to the ABCP programme, with a syndicate of banks providing €6.5 billion of funding.

Yesterday the news worsened, as a further €80 million investment in IKB's loan conduit, Rhinebridge, was announced. The vehicle completed its first series of funding only in July this year, and the bank announced that the measure was being taken to secure funding for the $2.4 billion vehicle.

In addition, IKB has sought permission from Deutsche Boerse to delay publication of their quarterly results from August 14 to September 28. The chief financial officer, Volker Doberanzke, has also resigned with immediate effect.

Previously in Risk:
United Capital moves to halt investor exodus
ABN's Brushfield completes first CDO

The great German structured credit experiment

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• Topics
• Structured products
• Credit derivatives
• Securitisation