J.P. Morgan is hitting the ground running in 2002 with a cutting edge $7.3 billion notional, 5.25-year bullet, synthetic investment-grade CDO linked to a Moody's Investors Service index of 2,088 corporate entities rated Baa3' to A1'. Moody's declined to comment on the transaction or the promising new trend of index-linked CDOs.
While the par amount of the transaction is $7.3 billion, $6.9 billion is in super senior synthetic form and is not offered and $300 million will be offered in either notes or credit default swaps. The ratings on the debt tranches are yet to be determined.
The first-loss tranche is made up of $100 million (1.3% of par).
The 200-plus diversity score astounded analysts. The expected weighted average rating factor is 319 (Baa2'). Pricing is expected by the end of February.
