Belfast Telegraph – The credit crunch has claimed its first high-profile resignation in the UK with the departure of Barclays’ head of European collateralised debt obligations (CDOs), the explosive debt products that have helped to cause the meltdown.
Edward Cahill, who ran the European CDO business at Barclays Capital, Barclays’ investment banking business, resigned on Monday. On Wednesday, two investment funds set up by his business had their credit ratings slashed by Standard & Poor’s, the rating agency, because of losses from investments in US mortgage-backed securities.
CDOs are investment products that parcel up different grades of debt – from very risky to the supposedly safe – in a way that gets them high credit ratings. But massive defaults on sub-prime mortgages in the US, which feature in many CDOs, have caused huge losses for institutions and made investors steer clear of any debt they cannot understand.
The downgraded funds were so-called SIV-lites, versions of structured investment vehicles which invest in long-term assets and finance themselves with cheap short-term debt called asset-backed commercial paper (ABCP). Mr Cahill’s team has been a leader in setting up SIV-lites for clients.
