KBC confirms plan to redeem CDOs

KBC has confirmed that it plans to redeem a number of its synthetic CDOs early. The bank has already executed the strategy on Lancaster CDO, a deal launched by the bank in 2008 and followed this up on a similar vehicle, Fulham CDO, which was redeemed last month. KBC is now actively looking at the prospect of redeeming several other CDOs from its legacy book, according to a statement by the bank.

KBC entered into a restructuring plan in November 2009 to divest in a number of its assets in return for state aid. Over the last couple of years the bank has sold some of its non-core assets including Belgian retail bank Centea and its asset management unit KBC Financial Products.

But in July KBC sought to amend its restructuring plan given the changes that have taken place in the credit markets in the last two years. The bank looked to the European Commission to approve a move which would see KBC unwind a number of its CDOs to release capital as an alternative to selling minority stakes in CSOB Bank and K&H Bank, based in Czech Republic and Hungary respectively.

Earlier this year KBC announced that it had made a gain of €294 million from the CDOs held in its legacy book. The CDO book consisted of self-managed synthetic CDOs. Recently Citi has also been looking to redeem some of the synthetic deals it originated in a bid to reduce the risk on its balance sheet.