EUROPE - Fortis Investment Management has launched its first managed synthetic collateralised debt obligation (CDO), which already has two European pension fund clients.
The Royal Bank of Scotland Financial Markets-led Rubens CDO I is backed by a E1bn pool of investment grade corporate securities and synthetics (total return swaps and credit default swaps).
Unlike previous hybrid structures seen by the market, the structure of Rubens does not require a liquidity facility to fund the purchase of securities. Instead, RBS makes liquidity directly available to Fortis Investment Management to fund the securities through unfunded total return swaps.
Management fees for the CDO are low: 5bp for the senior notes and 10bp for junior notes – especially low as this is Fortis’s first product.Despite the market’s current avoidance of synthetic CDOs, Fortis said there has been very strong interest for all tranches of this transaction, particularly with the lower rated and unrated tranches.
The capital structure includes five tranches of floating rate notes and a combination note totalling E130m in the aggregate below a E870m super senior credit default swap.
All liabilities have a seven-year scheduled maturity date and average life and an eight-year legal final.
Christophe Tamet, senior fixed income manager at Fortis, said: “This innovative structure, designed by RBS, is the best way to introduce our philosophy of management in the universe of total return.”
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