ING closes first arbitrage synthetic CDO

ING Financial Markets closed its first arbitrage synthetic collateralised debt obligation today. The CDO is referenced on a static portfolio of 100 credit default swaps worth $1 billion.

As part of the transaction, special purpose vehicle Alison Synthetic has issued four classes of notes due November 14, 2007.

The class A tranche includes $57 million of notes rated AAA/Aaa offering a coupon of 90 basis points over three-month Libor; while the class B tranche comprises ¥2.44 billion of notes rated AA-/A1 with a fixed coupon of 3.1%. Class C contains $8 million of notes rated BBB+/Baa1 with a coupon of 400bp over Libor; while class D has $5 million of notes rated BBB-/Baa2 with a coupon of 750bp over Libor.

The credit default swaps were geographically 69% from the US, 28% from Europe and 3% from Asia. The average rating of the credits was A/A2. The 100 credits came from 27 different industries with a maximum industry concentration of 8%, ING said.

The notes were placed in Asia, Europe and the Middle East.

ING has structured similar cash deals around the world, but this is its first foray into synthetic structures.

ING Financial Markets is a marketing name for ING Bank’s activities in sales, trading and distribution of equity and debt market products, research, treasury, foreign exchange, money markets and derivatives.