Fortis launches its first managed synthetic CDO

In a deal led by Royal Bank of Scotland's Financial Markets arm, Fortis Investment Management has launched its first managed synthetic collateralized debt obligation (CDO).

Dubbed Rubens, the €1 billion CDO is backed by a pool of investment grade corporate securities, credit default swaps and total return swaps. The usual practice of establishing a liquidity facility to fund the purchase of securities has been eschewed. Instead, the European asset manager taps Royal Bank of Scotland (RBS) directly to fund the purchase of securities.

The UK-based bank said the novel structure provides investors with "transparency" and "greatly simplifies what would otherwise be a complicated structure." RBS also claimed that there has been "very strong interest" among investors, particularly for the lower rated tranches and the equity piece.

Rubens' capital structure is dominated by a €870 million super senior credit default swap. The remaining €130 million notional consists of five tranches of floating rate notes and a combination note.