Goldman Sachs announced last week that it had closed two collateralized debt obligations for institutional clients, highlighting the increasing popularity of this synthetic structured product in Asia.
First to close was a five-year deal backed by $1.7 billion of credit default swaps for United Overseas Bank - the third by the Singaporean Bank. This was shortly followed by an issue backed by $1.5 billion of synthetic credits managed by Agricultural Bank of China, the first mainland financial institution to be involved in such a deal.
UOB's transaction - issued out of the United Global Investment Grade CDO III special purpose vehicle - is linked to 148 CDW from a range of corporate borrowers located across the US, Europe and Asia.
The special purpose vehicle issued three public tranches rated by Standard & Poor's: a $19.5 million triple-A rated piece, $31.5 million of single-A rated notes and a triple-B rated $17 million tranche. In addition, there will be a $54 million equity piece, believed to be retained by Goldman Sachs.
Unfortunately, as was the case with the issuers two previous Asian CDOs launched in September and December of last year, neither UOB or the lead manager would disclose pricing details or information about placement on the latest transaction.
In addition, few details have so far emerged about the deal managed by the Agricultural Bank of China, other than it is linked to a portfolio of 150 credits and the bonds were issued through the Great Wall 1 SPV.
However, Wassim Younan, managing director and head of Asian fixed income at Goldman Sachs, was prepared to talk more generally about the CDO product in Asia and is confident that the recent growth in issuance will continue.
"We have been active in this product globally and in Asia for the last couple of years, although many of these Asian deals have been done privately," he comments. "We believe there is potential for strong activity in this and similar credit products in Asia. Awareness has increased among investors keen to enhance yield while diversifying their exposures to global credits."
