Taiwan CBO with PPN

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Taiwan CBO with PPN
Joice Shih Director Global Securitized Market,
Asia-Pacific Citigroup July 14, 2006
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Typical NTD/USD Hybrid CBO Structure in Taiwan
Taiwan NTD/USD Hybrid CBO Structure
Background for NTD/USD Hybrid CBO

• Huge local currency liquidity
• Limited local currency investment opportunities
  especially for structured product
• Restriction on foreign investment for insurance
  companies
• Very tight credit spread v.s. rating (tighter
  than equivalent rating USD asset)

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Why PPN

• CBO Structure Puzzle.

• Purpose of CBO
• Nature of NTD asset
• Balance of yield, risk and volatility

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Why PPN

• When CBO meets Investors.

• Plain Vanilla
• low credit risk
• simple payoff
• low volatility
• shorter duration

NTD Structured Bond 50
Low Credit Risk
Low Yield
Higher Yield
Unfamiliar Credit Risk

• Exotic
• higher credit risk
• structured payoff
• higher volatility
• longer duration

USD Asset 50
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Why PPN

• PPN matches the needs
• What is PPN?
• How PPN helps?

High rating Zero (70)
100
High yield product (30)
De-leverage to reduce the volatility
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What is Achieved and What to Expect

• Good demand with over subscription.
• The largest deal in Taiwan securitization market
  (NT18.4bn).
• The only deal using Cash CDO/CLO as underlying
  collateral.
• Import structuring know-how to Taiwan market from
  different global product teams e.g. CDO, MTN,
  derivatives etc.
• Demand or repeating structure or similar local
  fixed income product.
• .Thank You