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Finance, Accounting and Control Case Study
Case Title:ICICI'S CDO
Publication Year : 2003
Authors: Arti Jhuremalani & G Srikanth
Industry: Banking, Insurance and Financial Services
Region:India
Case Code: FAC0002
Teaching Note: Not Available
Structured Assignment: Not Available
Abstract:
India's maiden Collateralised Debt Obligation (CDO) structured by Industrial Credit and Investment Corporation of India Ltd(ICICI). Under the ICICI Securities Fund was on similar lines to a close-ended mutual fund. The primary motive behind the introduction of this CDO was to fulfil the adequate reserve requirements as prescribed by the Reserve Bank of India before the reverse merger of ICICI Bank and ICICI. But the initiative taken by ICICI met with disastrous results. Investors felt that the risk involved was much more than the returns they would earn. The complexity involved in the investment procedure was also another factor adding fuel to the failure.
Pedagogical Objectives:
- To understand the need for ICICI to introduce CDO
- To discuss the reasons for the failure of the CDO.
Keywords : Development financial institution, Special purpose vehicle, Debentures and loans, Collateralised Debt Obligation, CDO, Asset management company, Asian CDO market, First CDO, Multiple tranched, Finance Case Study, Indian corporate CDO fund, Industrial Credit and Investment Corporation of India Ltd, ICICI, Mutual fund, Statutory liquid and cash reserve ratios, Reverse merger
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