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ALLEN & OVERY ADVISES ON INNOVATIVE COLLATERALISED SYNTHETIC OBLIGATIONS (CSO) ISSUANCE

International law firm Allen & Overy acted as deal counsel on a transaction arranged by J.P. Morgan Securities Ltd. involving an issue of EUR180,000,000 collateralised synthetic obligations by Balthazar CSO IB.V.

The transaction was structured as an issuance of three senior tranches which were rated Aaa, Aa3 and A3 by Moody's and AAA, AA- and A- by S&P, a tranche of combination notes rated Aaa by Moody's and an unrated subordinated tranche. The issue proceeds were invested in collateral comprising Aaa/AAA rated collateral debt securities.

The transaction involves the issuer entering into a portfolio of credit default swaps under which the issuer sells protection on a number of reference entities to JPMorgan Chase Bank as swap counterparty. The collateral comprises security for the issuer's obligations to the swap counterparty and the noteholders under the notes. The issuer's exposure under the credit default swaps is managed by Henderson Global Investors Limited.

The Allen & Overy team was led by international capital markets partner Angus Duncan, with assistance from senior associate Sonia Lim, associate Emma Buckley and several other team members. Partner David Benton, assisted by Parya Badie, advised on the derivatives aspects of the transaction. Allen & Overy also provided advice in The Netherlands (Pim Horsten and John
Brouwer) and Belgium (Peter Bienenstock).

Angus Duncan commented:
"We are very happy to have concluded another successful CSO for J.P. Morgan. The transaction was one of the most complex we have worked on, building in several innovative structural features to deal with the exposure of the single swap counterparty (JPMorgan Chase Bank) to the deal".

Allen & Overy acted also for U.S. Bank National Association as trustee, with partner Morgan Krone assisted by Malcolm Charles. The portfolio manager was represented by Ashursts Morris Crisp (Sian Withey, Michael Logie and Ainslie Reddin).

Allen & Overy has recently completed working on the Robeco CDO VI and AIG-Mezz Vest CDOs and is currently working on a number of other CDO transactions.

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