Wharton has formed Delta CDO PLC Series 2005-1, a $2.2 billion CDO (collateralized debt obligation) of high-grade asset backed securities (ABS) to be managed by Wharton Asset Management.
“Delta is structured as a synthetic CDO that gives investors exposure to pure ABS credit risk and removes a range of other risks found in comparable cash structures (e.g. available cap risk, FX risk, funding risk etc),” according to a press release from the company. “This highly innovative and cost efficient structure enables investors to gain exposure to a higher quality ABS portfolio than it would have been possible in a standard cash deal given the current market conditions.”
Deutsche Bank will purchase the underlying portfolio from Wharton Asset Management on the closing date and Deutsche will acquire protection on the mezzanine risk embedded in the USD 2.2 billion reference portfolio by entering in a series of portfolio credit swaps with the issuer, Delta CDO plc, a bankruptcy-remote Irish SPV. The issuer will then transfer this credit risk to investors by issuing three classes of rated Credit Linked Notes under the Delta CDO 2005-1 transaction.