With the blessing of a triple-A rating from Moody's Investors Service, hedge fund Aladdin Capital Management became the proud parent of the newest credit derivative product company on the block. The road to obtaining a CDPC rating is a long, drawn out process, sources said - but demand certainly seems strong enough to obtain one.
The rating agency said last week that it is sifting through 24 proposals for CDPCs, and that it is likely to rate several in the first half of the year. CDPCs are essentially a stand-alone business, so models vary. CDPCs typically act as highly rated counterparties in credit default swaps, although their activities range from single-name swaps to an area that makes monoline insurers uncomfortable - selling protection for highly rated CDO tranches. By and large, most of the proposals before rating agency analysts involve selling credit protection via either single-name swaps or CDOs referencing corporate credit.