BarCap structuring second collateralised forex deal

Barclays Capital is planning another bespoke collateralised foreign exchange obligation (CFXO), worth €20–€50 million, after closing its first at the end of 2006.

The original transaction was also privately placed and worth almost €50 million. Philippos Kassimatis, co-head of FX structuring at BarCap, said: "Credit portfolios that would typically favour this sort of risk-to-return profile are migrating to the safety of these structures, but with a different source of underlying risk." Kassimatis added he thought other banks were working on similar deals, although a large public transaction was more than a month away.

CFXOs resemble traditional collateralised debt obligations, but investors are exposed to the risk of a basket of currencies hitting exchange rate triggers instead of being exposed to corporate defaults. BarCap was also responsible for the first collateralised commodity obligation, which it launched in 2004.

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