Rating knock-outs

Constant proportion debt obligations and their AAA ratings have elicited strong feelings throughout the structured credit market since their invention in 2006. In the wake of market gyrations, both their net asset values and their ratings are under threat. By Mark Pengelly

Constant proportion debt obligations (CPDOs) excite feelings few other structured credit products can match. "I hated the CPDO," opines one London-based former credit structurer. For some, the products have come to encapsulate all the hubris of structured credit innovation, investing and rating they say gripped the market prior to the US subprime mortgage crisis.

The original CPDO, dubbed Surf, was unveiled by ABN Amro in July 2006. Offering a coupon of 200 basis points and rated AAA by New York