A new standardized CDO trustee report could make life a bit easier for investors before the end of the first quarter. The trick is getting market participants to use it.
The Bond Market Association just released its final draft of a standardized template for monthly CDO trustee reports. A comment period on the template will last until Feb. 9. In short, the new format improves the readability of these often-haphazard reports, which can differ greatly from trustee to trustee and deal to deal.
"There was an added level of complication that was unnecessary," said Nadine Cancell, vice president and assistant general counsel at TBMA. The association's CDO Committee took on the issue, having heard numerous investors say that trustee reports are hard to read primarily because they all have different formats, Cancell explained.
"The committee believed that if you had a standard format so people knew what section to look for, for certain items, it would make it easier for investors," she said. "Ultimately, it will make them more comfortable investing in CDOs." In addition, an easier format embraced by the market contributes to the greater transparency championed by the association.
However, the marketplace will ultimately decide the fate of the new template, which can't be enforced by TBMA. The document was issued as more of a guideline.
"It is up to the individual dealers to either incorporate this standard trustee report or not, in conjunction with trustees," said Cancell.
In short, the more investors demand the document be incorporated into deals, the more likely it is to be used. For information on submitting commentary, see the association's Web site.