Since E-trade and Adams Square, people seem to have been wondering what the implications are for the CDO market at large. Two instances of CDO’s rendered all but worthless (in one case by sale, in the other, liquidation) does not a trend make, but it does get tongues wagging.
Not that we haven’t been guilty of CDO doomsaying – so for the record, here’s a stark illustration of why it’s impossible to generalise about CDOs:
Three more CDOs in the Citi-run Westways programme are being liquidated after triggering event of default covenants. Senior note holders have opted for liquidation. But according to Moody’s – who reported the event – “nearly all of the noteholders will be repaid in full”.
Compare that to getting nothing.
Alea also points us in the direction of two NewSmith CDO restructurings. Admittedly they’re not recent, but illustrative of the fact that “CDOs have never been liquid or meant for trading, bids and final exit price can be significantly different.”