Hedge funds eyeing small banks lead CDO revival
Stonecastle CDO is backed by subordinated debt from small community banks
Add BT as a preferred source
New York
JOSHUA Siegel is bringing back one of the most toxic financial vehicles ever devised and arguing that this time, it is going to be different. His StoneCastle Financial is among the hedge funds that are reviving the collateralised debt obligation, or CDO.
CDOs stuffed with mortgages and their derivatives caused billions in losses around the world during the 2008 crisis. The CDO that StoneCastle put together is a little different. It is backed by subordinated debt issued by about 35 community banks, some of them so small that they do not have credit ratings. Subordinated debt is paid off last in a bankruptcy, so issuers typically compensate buyers with higher yields than on other borrowings.
Share with us your feedback on BT's products and services
