S&P rates first structured product as an index

Credit rating agency Standard & Poor's (S&P) has rated, for the first time, a structured finance transaction, Core Investment Grade Bond Trust I, as an index rather than as a collateralised debt obligation.

The structure's credit rating analysis focused on the default and cashflow characteristics that combine to make the certificate-holder's position consistent with that of the holder of an A- rated bond.

Certificates from the transaction represent fractional pro rata interests in an underlying portfolio of approximately $4 billion of investment grade corporate bonds. The rating represents the weighted average rating of the underlying portfolio based on potential losses.

Stucture guidelines give no mandatory conditions for the liquidation of underlying bonds. Rather, liquidation of collateral may be requested by investors.

Twenty two corporations from a cross-section of industries will issue bonds into the structure. Standard & Poor's was unable to immediately provide details of issuer names.