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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.

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CDOs in the Heartland

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  1. CDOs in the Heartland Thursday, March 20, 2003

  2. CDOs in the Heartland 2002 Review CDOs in the Crosshairs?

  3. CDOs in the Heartland 2002 Review Total CDO issuance  $208Billion (+38% YoY) Cash CDO issuance  $61Billion Synthetic CDOs  $147Billion (+74% YoY)

  4. 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%

  5. CDOs in the Heartland 2002 Synthetic CDOs: Static Arbitrage – 51% Balance Sheet – 38% Managed Arbitrage – 11%

  6. 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?

  7. CDOs in the Heartland CDOs in the Crosshairs… Effective risk dispersion reducing systemic risk (Alan Greenspan) OR Financial weapons of mass destruction (Warren Buffett)

  8. CDOs in the Heartland 2003 Challenges Resolve CDO accounting uncertainty Restore CDO investor confidence Continue to improve/refine CDO structures Transparency/comparability is necessary for liquidity

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