London manager claims CPDO first
Story date: 2007.7.31
7 June 2007
Cairn Capital can make a credible claim to having brought to market the first fully managed CPDO after the first tranches of its Cairn CPDO I were priced by JP Morgan last week.
According to an investor, just over €100 million of the deal priced late last week, with the Moody`s Aaa-rated tranche paying a coupon with a 130bp spread and a smaller double A tranche paying 230bp. The deal is rated only by Moody`s and has a 10-year legal maturity, and JP Morgan is expected to tap the deal over the coming weeks.
The first CPDOs appeared in mid-2006 and were all based on indices, but issuance ground to a halt at the end of last year after the rating agencies decided to rethink their methodologies. A source at one rating agency says it is currently in discussions with every dealer in the London market about getting a new-style CPDOs rated, and almost all of these deals include some type of management.
Lehman Brothers priced a deal in March on which Pioneer Investment Management acts as manager. However, Cairn Capital is thought to have greater discretion than Pioneer over the composition of its portfolio, which can include names from off-the-run indices as well as the current version, and both long and short positions.
Other firms that are racing to get their deals to market feature bespoke portfolios with a requirement for the manager to substitute names if they fall below investment grade. Officials at both JP Morgan and Cairn Capital decline to comment on their deal ahead of its closing.
Reproduced with permisison from Creditflux
