UBS Warburg recently brought to market the first synthetic collateralized loan obligation to come out of Switzerland. Called HAT - or Helvetic Asset Trust - the SFr350 million ($212 million) transaction securitizes part of the credit risk attached to a portfolio of loans originated by UBS to small- and medium-sized businesses in Switzerland.
Under the terms of the deal, the SPV enters into a credit default swap with UBS to cover any unexpected losses on the loans. Effectively, what goes into the SPV is not a transfer of credit but the loan loss risked. All the loans - which include fixed advances, current account overdrafts and corporate loans - will remain with the bank.