In dem Zusammenhang stelle ich gleich mal zwei interessante Videos ein, die ein verständliches Bild darüber abgeben, wie der Credit Default Swap Market funktioniert.
CDO Trading Returns as Wall Street Plans $4.3 Billion Auction
By Pierre Paulden and Shannon D. Harrington
Sept. 24 (Bloomberg) -- Babson Capital Management LLC and GoldenTree Asset Management LP are among investors bargain- hunting in the $650 billion market for collateralized debt obligations linked to corporate debt as credit markets open.
An estimated $11 billion of CDOs backed by high-yield, high-risk loans or linked to corporate bonds using credit derivatives, have exchanged hands this year, according to Morgan Stanley and JPMorgan Chase & Co.
Trading in CDOs that contributed to $1.6 trillion of writedowns and credit losses at banks worldwide increased after the Federal Reserve doubled its balance sheet to more than $2 trillion to rescue financial institutions. Prices have more than tripled since May for some securities tied to company debt as analysts and investors lowered their predictions for defaults and the economy showed signs of emerging from the longest recession since the Great Depression.
“CDO trading activity has been huge since May,” said Joseph Naggar, a partner at GoldenTree in New York, which oversees $11 billion and has bought loan CDOs and so-called synthetic CDOs composed of credit-default swaps. “Access to the capital markets has dramatically improved for companies. As some of the underlying corporate assets have improved, CDOs have followed.”
The market for buying and selling CDOs, which repackage assets such as mortgage bonds and loans used in corporate buyouts into new debt with varying degrees of risk, was shut down last year in the wake of Lehman Brothers Holdings Inc.’s bankruptcy filing, Naggar said.
Prices Recovered
Trading has restarted and prices recovered as government support of the banking system increased liquidity, Citigroup Inc. analyst Ratul Roy said.
The three-month London interbank offered rate, the amount banks charge to lend to one another, has declined to 0.28 percent, from 4.82 percent on Oct. 10, when the spread between the lending benchmark and the Fed’s target rate reached a record following the Lehman collapse.
Victoria Finance Ltd., a structured investment vehicle that defaulted last year, plans to liquidate $4.3 billion of CDOs tomorrow.
The Victoria auction includes $623 million of corporate- debt backed deals, according to a list obtained by Bloomberg News. Stone Tower Management LLC, a New York-based investment firm that took over running the SIV from Ceres Capital Partners LLC after the vehicle could no longer sell commercial paper, is overseeing the auction. They are selling $2.3 billion of residential mortgage-backed securities and almost $500 million of corporate bonds Victoria held.
‘Watershed Event’
“The liquidation of Victoria Finance will be a watershed event” to show market appetite, Roy said in a telephone interview. “There is increased risk appetite for almost all forms of CDOs at the right price. There has been a huge increase in the amount of secondary trading.”
More than $6 billion of collateralized loan obligations, a form of CDO that pools high-yield, high-risk loans, have traded publicly since May, according to JPMorgan. High-yield, high-risk debt is rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s.
Morgan Stanley analysts, who in January called the secondary market for CDOs of corporate credit-default swaps “a $300 billion distressed opportunity,” estimate $5 billion of the CDO securities have traded this year.
‘Active Market’
“There’s quite an active market now,” said Sivan Mahadevan, a derivatives strategist at Morgan Stanley in New York. “Every time there’s a seller in the market, these investors will come in and participate in the auctions or buy them directly.”
Babson has bought more than $200 million of CDOs since April, Matthew Natcharian, the head of Babson’s structured credit team, said in a telephone interview. The $110 billion investment firm, based in Springfield, Massachussetts, is among buyers of distressed CDOs such as Elliott Management Corp. in New York and Bain Capital’s $19 billion debt investment arm Sankaty Advisors LLC in Boston.
Babson has primarily bought CDOs of loans, Natcharian said. GoldenTree has purchased mainly CLOs and some synthetic CDOs, Naggar said.
Index Climbs
Loan CDOs have gained as prices on the underlying debt climbed from record lows and prospects for companies failing diminished, Roy said. The S&P/LSTA 100 Leveraged Loan index has gained 19.6 cents since the end of March to 86 cents on the dollar as of yesterday. Loans have gained a record 46.9 percent this year after losing an unprecedented 28.1 percent last year, the S&P/LSTA index shows.
That’s boosted CLO portions ranked AA, the third-highest level of investment grade, which have more than doubled in the past four months to as much as 70 cents on the dollar. Securities ranked BBB have tripled to 35 cents, Roy said.
The rise in prices still doesn’t always reflect the gains in the underlying loans, Natcharian said.
“Buying CLO pieces is an opportunity to buy bank loans at a discount to where they are trading,” he said.
Synthetic CDOs, which sell credit-default swaps that receive annual premiums in return for taking on the risk of losses from corporate bond defaults, have in some cases doubled after values dropped to less than 10 cents on the dollar.
The most common synthetic CDO is a so-called mezzanine tranche, in which investors take on a thin slice of risk. They may, for example, take losses only after the first 5 percent of companies in the portfolio default, minus the recovery value. If the losses reach 6 percent, the mezzanine portion is wiped out.
Top Ratings
Many of the bonds were given top ratings by S&P, Moody’s and Fitch Ratings because they were backed by highly rated and diversified companies. Creators of the deals, though, often loaded the portfolios with financial companies that either failed during the crisis last year, including Lehman and three Icelandic banks seized by their government, or were cut below investment grade, such as bond insurers MBIA Inc. and Ambac Financial Group Inc.
Prices on the most distressed bonds that fell to less than 10 cents on the dollar may now be approaching 20 cents, Mahadevan said. Bonds less likely to fail, particularly those with shorter maturities, have rallied more, from a range of about 30 to 40 cents on the dollar to 60 to 80 cents, he said.
The upfront cost of credit-default swaps guaranteeing the 3-percent to 7-percent slice of risk on the Markit CDX North America Investment Grade Index Series 9 has dropped by 46 percentage points since March 5 to 12.4 percent of face value, according to CMA DataVision.
Bondholder Protection
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company’s ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.
Prospects for corporate debt are improving with Moody’s predicting the global speculative-grade default rate will rise to a peak of 12.6 percent in the fourth quarter of this year and then decline to 4.3 percent by August 2010, the New York-based ratings company said Sept. 21 in a statement. In March, Moody’s estimated the worldwide default rate would reach 14.8 percent by the end of 2009, falling to 13.8 percent by next February.
The same appetite isn’t returning for CDOs that are backed by asset-backed securities, said Morgan Stanley analyst Vishwanath Tirupattur.
A rise in prices during May and June also made CLO securities less attractive to some investors, such as Elliott. As of June 30, the New York-based investment firm cut its exposure to these securities, which had “traded cheap to the underlying loans,” Elliott wrote in a letter to its investors.
Elliott spokesman Scott Tagliarino declined to comment.
Many holders of corporate CDOs also are unlikely to sell as prospects for recovery improve. Some investors also have restructured the bonds they hold by injecting money into them and making them safer, Mahadevan said.
“Clearly not everyone is going to sell,” he said.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a5KbYLsaKQhU
>>>Collateralised Debt Obligations (=CDO) sind Wertpapiere, die durch einen Pool diversifizierter Vermögensgegenstände besichert sind (Asset Backed Securities). Diese Vermögensgegenstände sind entweder ein Pool von Forderungen in Form von Anleihen (in sog. Collateralised Bond Obligations = CBO), Krediten (in sog. Collateralised Loan Obligations = CLO), Credit Default Swaps oder eine Mischung daraus. Die Produktbezeichnung CDO ist der Oberbegriff. Die Finanzierung der Forderungen erfolgt durch die Emission von Anleihe- und sog. "Equity"-Tranchen mit unterschiedlicher Rangigkeit.<<< www.cecu.de/506+M58a105a3020.html
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