Commerzbank kicked off the season for small and medium enterprises (SMEs) loan CDOs with its CB Mezzcap deal, which priced at the beginning of April. It was closely followed a week later by a transaction from HSBC Trinkhaus & Burkhart. On the heels of these two transactions, market sources say there are several more CDOs of this type expected to come to market later this year.

The deals referenced subordinated profit participation agreements with German SMEs and functioned as conduit-like origination platforms where securitization is integral to the business model, explained analysts at Deutsche Bank. Both Deutsche Bank, via its IKB equiNotes joint venture, and HVB, through its PREPS program, have both employed a similar structure in the past.

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