Credit Derivatives Product Company

Credit Derivatives Product Company

Credit Derivatives Product Companies, or CDPC, are a business almost solely focused on selling credit default swaps contracts. IE, they basically sell 'insurance' against someone failing to pay back a loan ('defaulting'). CDPC are usually highly leveraged, meaning that if even a portion of their held CDS portfolio were to be 'triggered' at once, they wouldn't have the money to pay out the full resulting insurance claims. The CDPC business model is dependent on a AAA rating from a credit rating agency.[1][2]

Contents

History

The first CDPC was Primus, in 2002.[1]

In October 2008 Fitch Ratings withdrew its ratings on all 5 CDPCs that it had previously rated, citing in part "the uncertain business prospects for CDPCs".[3]

List of CDPCs

Name Date Sponsors, Investors, related parties CDS counterparties Refs
Primus Financial Products 2002 [1]
Aladdin Financial Products [3]
Athilon Structured Investment Advisors 2004 Dec Lightyear Capital [1][2][3]
Cournot Financial Products Morgan Stanley, Frank Iacono [3][4]
Invicta Capital 2007 Jan Babson Capital, MassMutual [3][5][6]
Quadrant Structured Credit Products 2007 Oct Magnetar Capital, Lehman Brothers [3][7]
Pallium Investment Management Bank of Montreal, others [2]
NewLands 2007/2008 DeutscheBank, AXA [2]
Structured Credit Holdings 2006 June Aquiline, CalPERS, CDPQ, Calyon, Triad, ex-employees of Radian Morgan Stanley, Bear Stearns, Nomura, Natixis, BoA, HSBC, Deutsche Bank, UBS [8][9]
Bear Stearns Asset Management [2]
Channel Capital Early 2007 Calyon, LBBW, Principia Partners (IT) [10]
Koch Financial Products
Satago Financial Products
Theta Corporation
Deerfield Capital Management
Harbor Road Financial Products Tricadia Capital [11]

See also

  • Monoline insurers (also dependent on a AAA rating, also sold credit default swaps)

Notes

  1. ^ a b c d For basic overview of CDPC please see: Edmund Parker, Melanie Barrow (2008 1 28). "LEARNING CURVE: Credit Derivative Product Companies – A Primer" (pdf). http://www.mayerbrown.com/publications/article.asp?id=4177&nid=6. Retrieved 2010 5 3. . For basic 'insurance' analogy and 'leverage' explanation, please see Wikipedia articles on credit default swap and leverage.
  2. ^ a b c d e Another nice intro is Emily Barrett (unknown). "CDPCs strive to reach the tipping point" (pdf). americansecuritization.com. http://www.americansecuritization.com/uploadedFiles/CDPCs.pdf. Retrieved 2010 5 3. 
  3. ^ a b c d e f Fitch Withdraws CDPC Ratings Business Wire 2008 10 17, accessed 2010 5 3
  4. ^ Morgan Stanley 10-k SEC filing, Subsidiaries, 2008 1 29, accessed 2010 5 3
  5. ^ Babson Capital named best CDO manager* by Euromoney 2007 6 8, babsoncapital.com, accessed 2010 5 3
  6. ^ Invicta Financial Group: About Us, invictafinancial.com, accessed 2010 5 3
  7. ^ Derivatives Week, Oct 22 2007, Quadrant CDPC Plots Wide Remit
  8. ^ Troubled Irish Company Allowed to Revamp Eamon Quinn, NY Times, September 6, 2007, accessed 2010 5 3
  9. ^ Radian team quit for start-up , Creditflux Ltd. (April 6, 2006), accessed 2010 5 3 via securitization.net
  10. ^ Channel Capital Rolls Out Into Growing CDPC Arena, Derivatives Week, March 26, 2007
  11. ^ Tricadia Preps CDPC 2008 4 9, Corrine Smith, Structured Credit Investor, accessed 2010 5 3



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