"Deceptive and negligent": How the first CPDO got its AAA rating
An extraordinary Australian court judgement shines a light on the errors and deceit that led to the granting of an AAA rating to ABN Amro’s Surf constant proportion debt obligation in 2006. Lukas Becker reports
In late 2006, the head of securitisation at a large European bank attended a Moody's Investors Service conference on structured finance. One presentation extolled the benefits of a complex, new product called a constant proportion debt obligation (CPDO) that boasted a triple-A rating despite being based on indexes containing BBB-rated corporates. It promised to pay an incredible 200 basis points above Libor.
That didn't make sense to the securitisation head. "I thought at the time that it was
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