The shape of CDOsto come
1. See K.E. Kohler, “Collateralized Loan Obligations: A Powerful New Portfolio Management Tool for Banks,” Mayer Brown LLP (1998) (http://mayerbrown.com/publications/article.asp?id=2229&nid=6).
2. Additional changes on the horizon for CDOs may include less reliance on external credit enhancements, more conservative tests and triggers, new rating agency guidance, and more. Alas, space constraints preclude our discussion of these other issues.
3. For a discussion of project finance loans in CDOs, see J.P. Forrester, “Project Finance Collateralized Debt Obligations: What? Why? Now?” Journal of Structured and Project Finance (Fall 2002), and C.L. Culp and J.P. Forrester, “Structured Financing Techniques in Oil and Gas Project Finance: Future Flow Securitizations, Prepaids, Volumetric Production Payments, and Project Finance Collateralized Debt Obligations,” in Energy and Environmental Project Finance Law and Taxation: New Investment Techniques, A.S. Kramer and P.C. Fusaro, eds. (London: Oxford University Press, 2010 forthcoming).
4. See, eg, UBS AG, Shareholder Report on UBS’s Write-Downs (18 April, 2009).
5. See, eg, K.S. Gerardi, A. Lehnert, S.M. Sherland, and P.S. Willen, “Making Sense of the Subprime Crisis,” Federal Reserve Bank of Atlanta Working Paper No. 2009-2 (February 2009), and W.N. Goetzman, L. Peng, and J. Yen, “The Subprime Crisis and House Price Appreciation,” NBER Working Paper 15334 (September 2009).
6. Protium is similar to Merrill Lynch’s July 2008 transaction with the Lone Star Funds private equity group. Merrill sold a US$30.6bn notional ABS CDO portfolio for US$6.7bn to Lone Star and loaned most of the purchase price to Lone Star, which put up only US$1.675bn of its own money.
7 See, eg, R. Ahluwalia and M. Wang, “Collateralized Debt Obligations,” J.P. Morgan US, US Fixed Income Markets 2010 Outlook (25 November, 2009).