Credit Suisse CDO takes big loss
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A so-called collateralized debt obligation managed by Credit Suisse Group liquidated its mortgage bonds and related derivatives, recording a loss of more than 75% on the securities, Standard & Poor’s said Wednesday.
About $165 million of Adams Square Funding I’s notes, including debt originally rated AAA, won’t be repaid, S&P; said, based on information from a trustee.
That means even the fund’s most senior class of investors will have losses on their holdings, originally valued at $315 million, the New York-based ratings firm said.
A Credit Suisse spokesman declined to comment.
CDOs repackage assets such as sub-prime mortgage bonds or loans used to finance corporate buyouts into complicated new securities with varying layers of risks. As a result, the new securities can receive debt ratings that are higher or lower than the ratings on the underlying bonds and loans.
The securities held by the senior classes get higher ratings than the holdings of the junior classes.
Adams Square mainly held securities originally assigned low investment-grade ratings that were backed by home loans or derivative versions of such debt, S&P; said.
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