Download - CDOs in the Heartland
CDOs in the Heartland
Thursday, March 20, 2003
CDOs in the Heartland
2002 Review
CDOs in the Crosshairs?
CDOs in the Heartland
2002 Review
Total CDO issuance $208Billion (+38% YoY)
Cash CDO issuance $61Billion
Synthetic CDOs $147Billion (+74% YoY)
CDOs in the Heartland
2002 Cash CDOs:
MS CDOs – 35% (+21% YoY)
HY CLOs – 31% (+30% YoY)
Other – 12%
BS CDOs – 9%
IG CDOs – 8%
HY CBOs – 5%
CDOs in the Heartland
2002 Synthetic CDOs:
Static Arbitrage – 51%
Balance Sheet – 38%
Managed Arbitrage – 11%
CDOs in the Heartland
Defaults/downgrades continued (although default rates abated slightly)
CDO spread widening on all tranches
FASB’s SPE consolidation/FIN46
2003 Flat YoY?
CDOs in the Heartland
CDOs in the Crosshairs…
Effective risk dispersion reducing systemic risk (Alan Greenspan) OR
Financial weapons of mass destruction (Warren Buffett)
CDOs in the Heartland
2003 Challenges
Resolve CDO accounting uncertainty
Restore CDO investor confidenceContinue to improve/refine CDO structures
Transparency/comparability is necessary for liquidity