Allen & Overy in Tokyo has advised Daiwa Securities SMBC as arranger and swap counterparty on the first public rated CEO (collateralised equity obligation) transaction, the first to be backed exclusively by equity default swaps and the first to be issued in multiple tranches.

Zest Investments V issued ¥31.5bn (US$295m) of notes in five classes. The notes, which were listed on the Luxembourg stock exchange, were backed entirely by equity default swaps on a portfolio of 30 blue chip Japanese corporates and an aggregate notional amount of ¥45bn (US$422m). The transaction closed on 22 March.

Tokyo-based partner Paul Cluley led the firm's team, which included partner Thomas Jones in Hong Kong and partner Paul Monk in London (who advised the trustee, Citicorp Trustee Company Limited).

Maples and Calder Asia advised Zest Investments V, with Asahi Koma Law Offices advising Daiwa Securities on Japanese law matters.

Given the thin spreads available on credit default swaps it has become increasingly difficult for banks to arrange CDOs.