JP Morgan Chase and UOB Asset Management close $1.7 billion synthetic CDO

US bank JP Morgan Chase said today it has closed United Global Investment Grade CDO II, the largest synthetic collateralised debt obligation (CDO) managed by an Asian fund manager - Singapore-based UOB Asset Management. It is the second United Global Investment Grade CDO, following a $1.33 billion transaction Deutsche Bank and UOB Asset Management sold in September.

The latest offer is referenced on a portfolio of 145 credit default swaps worth a notional amount of $1.7 billion. As part of the transaction, special purpose vehicle United Global Investment Grade CDO II is issuing two tranches of credit-linked notes rated by Moody’s Investors Service. There is also a funded unrated equity tranche and two unfunded Aaa and super-senior tranches.

The unfunded Aaa and super-senior tranches make up 93% of the transaction. JP Morgan Chase declined to give the breakdown of the unfunded tranches. The funded tranches comprise $34 million of Aa2-rated credit-linked notes, $34 million of Baa2-rated credit-linked notes and $51 million of unrated equity.

The portfolio is 10% of Asian names, with the rest split nearly equally between the US and Europe. Credits in the portfolio are all investment grade and their average rating is Baa1.