Creditflux Newsletter

Having the best deal name in the CDO market is no guarantee of success. Excellent Collaboration Special Purpose Vehicle had most of its tranches downgraded several notches by Moody’s last month. The Japanese balance sheet deal suffered from higher than expected defaults in its portfolio of loans to small companies. That may be excellent news for the municipalities that transferred their credit risk in early 2007 – but it isn’t so special for the CDO investors.

This column continues its campaign against confusing acronyms. Media company ClearChannel uses one that has, quite rightly, failed to catch on. It reports a measure of earnings it calls OIBDAN (operating income before depreciation and amortisation). This fails on two counts. First, ClearChannel hasn’t noticed that “amortisation” starts with an A. Second, OIBDAN is harder to say than the “ebitda”. If the company really needs an acronym for this spurious metric, we suggest opida. Or better still, it could report income after deducting all expenses.

Rating agencies point out that their ratings do not always agree with each other because of subtle and important differences in their methodologies (and not because they have simply taken their eyes off the ball). But sometimes the differences are startling. Take the class A1LB tranche of Rockwall CDO II, for example. It is rated AAA by Standard & Poor’s and Caa2 by Moody’s. We think this 18 notch difference is a record.