Deutsche Bank plans new credit derivatives company

Deutsche Bank and Axa Investment Managers are setting up NewLands Financial, a Bermuda-based company that will start offering credit derivative products in February next year.

Deutsche Bank has invested $125 million in the company and will hold a controlling stake. Axa is due to invest a smaller unspecified amount in return for a minority shareholding.

The company will sell corporate risk credit protection using highly rated collateralised debt obligations, Deutsche Bank said. "The ratings of the CDOs will be predominantly in the junior super-senior and super-senior category, with a small bucket for Aaa/AAA-rated tranches," the German bank added.

NewLands Financial will specialise in super-senior credit protection for the first year of operation. It may expand into other asset classes, such as asset-backed securities, in 2008.

Axa will provide portfolio management services, while Deutsche Bank provides risk management, infrastructure and operational services. The company will be run by a five-person board, comprising two members from Deutsche Bank and three independent directors, whose names are unconfirmed.

Deutsche Bank said it may bring in further partners in future, adding that it has none at present.