Upended by downgrades
The structured credit markets have been suffering as a result of problems arising from the US subprime mortgage crisis. Dealers expected worried investors to start questioning the viability of related collateralised commodity obligations, but they were not prepared for a surprise rating criteria change leading to major downgrades. By John Ferry
Barclays Capital knew it was on to something hot when it brought the first collateralised commodity obligation (CCO) to the market in 2004. Yield-hungry, diversification-seeking institutional investors lined up to buy the notes, which combined the structural features of a collateralised debt obligation (CDO) - subordination, tranching and a rating - with exposure to the commodity markets. Other dealers, most notably Credit Suisse, stepped in to offer their own versions of CCOs, and soon what had
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