Monday, July 27, 2009
DÃ©jÃ vu – CDO’s back in the news, remember them
"An anticipated gush of selling could cause the values of mortgage-related bonds to whipsaw in the coming months...A hint of the coming secondary-market supply was seen this week, when bondholders voted to liquidate Kent Funding 1, a CDO that Declaration Management issued in 2005 at a face value of $1 billion. The investors gained that power after the transaction hit an event of default on June 4...Of course, troubled CDOs have been unwinding all throughout the financial crisis. But a growing number of investors in those vehicles are expected to push for liquidations in the next 6-12 months, as the debt market's struggles continue. In many cases, they could be swayed by a desire to take advantage of the recent pricing rally."