Straits Lion Asset Management and Goldman Sachs have sold S$2.58 billion ($1.5 billion) of synthetic collateralized debt obligations (CDOs) to an unspecified group of investors. It is the first managed synthetic deal to be offered into the Singapore dollar market.
Straits Lion SGD CDO I provides investors with exposure to a basket of 105 corporate names, 59 of them from Asia, and proves once again the resilience of demand in the region and, in particular, for Singapore dollar assets. Just last week investors fully subscribed a S$1 billion offer of subordinated notes from UOB. "That showed the kind of demand that is there," says Lye Thiam Wooi, head of structured assets at Straits Lion.
"Increasing confidence has returned to Asia and this has been reflected in the gradual tightening of credit spreads. Even with the recent stock market volatility and geopolitical events, investment grade Asian names and, to a certain extent, global names have stayed fairly stable. Going forward, it is likely that corporate bonds would continue to see strong demand from investors."
Few details are being released about the structure of the deal but investors would typically have bought a triple-B rated mezzanine tranche while Goldman, which structured the transaction and acted as underwriter, holds on to the rest of the deal. The sold part of the deal is thought to have priced at about 210 basis points, which would put it on a par with the last CDO offered by the two institutions: the Straits Lion Asia CDO.
That deal was one of the first announced offers to package Asian credits and was the first managed deal from the region. With a seven-year maturity, five-year call option and offer size of $1.5 billion it was almost identical to this latest deal, except for the quantum swap into Singapore dollars.
Straits Lion will manage the portfolio for the life of the deal, giving it a total of about S$23 billion of assets under management.