In an encouraging development for structured products lawyers, advisers structuring synthetic CDOs say their clients are unperturbed by recent volatility in the equity and credit markets.
Though the co-head of one US firm's London securitization practice admits that there has been some concern in the cash collateralized debt obligation market, he says his clients are sticking to their original timetable on two synthetic CDO transactions.
The product is robust, say lawyers, thanks to actively managed portfolios which are traded on a market basis and tipped to withstand the current indigestion in the market.
Further, the leveraged loan market looks reasonably rosy says the same lawyer despite this transient indigestion – brought on by problems with the sub-prime mortgage market in the US.
The encouraging message for CDO and CLO specialists is that residual demand for the product is high thanks to a combination of banks looking to optimize their balance sheets and private equity activity continuing to drive the leverage loan market.
The comments undermine recent predictions regarding credit turmoil, but lawyers involved in structuring CDOs say that their product is strong and set to shrug off problems with some underlying assets.