Credit derivatives product company

A Credit Derivatives Product Company (CDPC) is a business focused on trading in credit default swaps contracts. CDPC typically sells insurance against someone failing to pay back a loan ('defaulting'). A CDPC is usually highly leveraged, meaning that if even a portion of its held credit default portfolio were to be 'triggered' at once, the CDPC would not have the capital to fully pay out the resulting insurance claims.

The CDPC business model is dependent on a triple-A rating from a credit rating agency. For basic 'insurance' analogy and 'leverage' explanation, please see Wikipedia articles on credit default swap and leverage. and must trade within closely defined limitations to be allowed to maintain their credit rating.

History

The first CDPC was Primus Financial Products, launched in 2002. In October 2008 Fitch Ratings withdrew its ratings on all five CDPCs that it had previously rated, citing in part "the uncertain business prospects for CDPCs".Fitch Withdraws CDPC Ratings Business Wire 2008-10-17, accessed 2010-05-03

List of CDPCs

Name Established Sponsors, Investors, related parties CEO Refs Primus Financial Products 2002 Tom Jasper Aladdin Financial Products 2007 Aladdin Capital Holdings Isaac Efrat Athilon Structured Investment Advisors 2004 Dec Lightyear Capital Pat Gonzales Cournot Financial Products Morgan Stanley Frank Iacono Morgan Stanley 10-k SEC filing, Subsidiaries, 2008-01-29, accessed 2010-05-03 Invicta Capital 2007 Jan Babson Capital, MassMutual Steve Kahn Babson Capital named best CDO manager* by Euromoney 2007-06-08, babsoncapital.com, accessed 2010-05-03Invicta Financial Group: About Us , invictafinancial.com, accessed 2010-05-03 Quadrant Structured Credit Products 2007 Oct Magnetar Capital, Lehman Brothers Gene Park Quadrant CDPC Plots Wide Remit, Derivatives Week, Oct 22 2007 Pallium Investment Management Bank of Montreal, others NewLands 2007/2008 DeutscheBank, AXA Structured Credit Holdings 2006 June Aquiline, CalPERS, CDPQ, Calyon, Triad, ex-employees of Radian Asset Assurance Troubled Irish Company Allowed to Revamp Eamon Quinn, NY Times, September 6, 2007, accessed 2010-05-03Radian team quit for start-up, Creditflux Ltd. (April 6, 2006), accessed 2010-05-03 via securitization.net Bear Stearns Asset Management Channel Capital Early 2007 Calyon, LBBW, Principia Partners (IT) Channel Capital Rolls Out Into Growing CDPC Arena, Derivatives Week, March 26, 2007 Koch Financial Products Satago Financial Products Theta Corporation December 2004 Gordian Knot Limited Deerfield Capital Management Harbor Road Financial Products Tricadia Capital Tricadia Preps CDPC 2008 4 9, Corrine Smith, Structured Credit Investor, accessed 2010-05-03

See also

Monoline insurers (also dependent on a AAA rating, also sold credit default swaps)

Notes