Icelandic bank launches new CPDO

An unnamed northern European bank is understood to be in the market with what would be the first new CPDO since the crisis. The arranger of the groundbreaking deal is not known, but it is understood to be an Icelandic institution, which is looking to distribute the notes to local government bodies in the Nordic country.

Well placed sources say the recent decline in credit spreads means that investors have an unprecedented opportunity to monetise the low volatility implied by current market prices.

If all goes well, the bank is looking to issue a follow-up deal which will add a constant maturity feature and possibly bring in a manager to add greater value through active trading strategies.

Although many investors in the first generation of CPDOs got their fingers badly burnt, sell-side sources believe the time is ripe to revive this technology. “There is a real appetite to take long-term credit risk right now,” says a senior source. “We believe anything is possible.”