Stifel to Buy $162.5 Million of School Notes Bond Buyer
CHICAGO — One day after being accused of fraud by the Securities and Exchange Commission for its role in advising five Wisconsin school districts on a risky investment scheme, Stifel Financial Corp. said it has finalized an agreement to purchase $162.5 million of school district-supported notes from Depfa Bank Plc.
The notes were sold by trusts set up by the districts to begin funding their other post-employment retiree health care obligations. They used the proceeds to invest in risky and complex products involving synthetic collateralized debt obligations.
The districts’ put their moral obligation behind the notes and when the investments soured, Depfa called on the districts to make good on their pledge. The districts refused as they pursued litigation against firms and others involved in the transaction including Stifel Nicolaus & Co. and RBC Capital Markets Corp.
In its announcement Thursday, Stifel reported that it purchased the notes at “substantial discount,” but did not disclose the price it paid. The news release noted the firm was a defendant in the school district litigation filed Sept. 29, 2008, stemming from the districts and their trusts’ $200 million investment in the CDOs. In addition to the trust notes, the districts contributed another $37.5 million towards the transactions.
Synthetic collateralized debt obligation (synthetic CDO)
The key difference between a cash and synthetic CDO is: instead of selling the reference portfolio (loans), the originator (bank) purchases credit ...
synthetic collateralized debt obligation - News
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