Crystal Ball Gazing: CDO New Issuance and Restructuring

From 2005 until the first phase of the credit crisis hit the capital markets in August 2007, the volume of issuance of structured finance instruments generally, and Collateralised Debt Obligations ("CDOs") in particular, rose dramatically: from US$158 billion in 2004 to US$521 billion in 2006, according to data published by the Securities Industry and Financial Markets Association (SIFMA). Global CDO issuance dropped off dramatically as the credit crisis hit, falling to US$43 billion for the final quarter of 2007 and to just US$758 million by the second quarter of 2009.

The good news is that a revival of sorts seems to be taking place in the CDO new issuance space, especially in the European markets. The issuance of asset-backed securities (ABSs), as well as some residential mortgage-backed securities (RMBSs), is also now on the rebound both in the US and beyond, and other more esoteric asset classes will likely follow. It would seem then that the issuance hiatus is