Credit derivatives product company

A Credit Derivatives Product Company, or 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.

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The CDPC business model is dependent on a triple-A rating from a credit rating agency[1] and must trade within closely defined limitations to be allowed to maintain their credit rating.[2]

History

The first CDPC was Primus Financial Products, launched in 2002.[1] 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".[3]

List of CDPCs
NameEstablishedSponsors, Investors, related partiesCEORefs
Primus Financial Products2002Tom Jasper[1]
Aladdin Financial Products2007Aladdin Capital HoldingsIsaac Efrat[3]
Athilon Structured Investment Advisors2004 DecLightyear CapitalPat Gonzales[1][2][3]
Cournot Financial ProductsMorgan StanleyFrank Iacono[3][4]
Invicta Capital2007 JanBabson Capital, MassMutualSteve Kahn[3][5][6]
Quadrant Structured Credit Products2007 OctMagnetar Capital, Lehman BrothersGene Park[3][7]
Pallium Investment ManagementBank of Montreal, others[2]
NewLands2007/2008DeutscheBank, AXA[2]
Structured Credit Holdings2006 JuneAquiline, CalPERS, CDPQ, Calyon, Triad, ex-employees of Radian Asset Assurance[8][9]
Bear Stearns Asset Management[2]
Channel CapitalEarly 2007Calyon, LBBW, Principia Partners (IT)[10]
Koch Financial Products
Satago Financial Products
Theta CorporationDecember 2004[11]Gordian Knot Limited [12][13]
Deerfield Capital Management
Harbor Road Financial ProductsTricadia Capital[14]

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

Notes
  1. Edmund Parker, Melanie Barrow (2008-01-28). "LEARNING CURVE: Credit Derivative Product Companies – A Primer". Archived from the original (pdf) on 2011-07-23. Retrieved 2010-05-03.. For basic 'insurance' analogy and 'leverage' explanation, please see Wikipedia articles on credit default swap and leverage.
  2. Emily Barrett. "CDPCs strive to reach the tipping point" (PDF). americansecuritization.com. Archived from the original (PDF) on 2011-07-07. Retrieved 2010-05-03.
  3. Fitch Withdraws CDPC Ratings Business Wire 2008-10-17, accessed 2010-05-03
  4. Morgan Stanley 10-k SEC filing, Subsidiaries, 2008-01-29, accessed 2010-05-03
  5. Babson Capital named best CDO manager* by Euromoney 2007-06-08, babsoncapital.com, accessed 2010-05-03
  6. Invicta Financial Group: About Us Archived 2010-03-22 at the Wayback Machine, invictafinancial.com, accessed 2010-05-03
  7. Quadrant CDPC Plots Wide Remit, Derivatives Week, Oct 22 2007
  8. Troubled Irish Company Allowed to Revamp Eamon Quinn, NY Times, September 6, 2007, accessed 2010-05-03
  9. Radian team quit for start-up , Creditflux Ltd. (April 6, 2006), accessed 2010-05-03 via securitization.net
  10. Channel Capital Rolls Out Into Growing CDPC Arena, Derivatives Week, March 26, 2007
  11. "Moody's assigns definitive counterparty rating of Theta Corporation and definitive ratings to its MTN and Commercial Paper programs". Moodys.com. 20 December 2004.
  12. "Gordian Knot WebSite". gordian.co.uk.
  13. "Moody's downgrades counterparty rating of Theta Corporation". Moodys.com. 17 March 2009.
  14. Tricadia Preps CDPC 2008 4 9, Corrine Smith, Structured Credit Investor, accessed 2010-05-03


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