Zions Bancorporation (ZION) said late Wednesday that it entered into a total-return swap and related interest-rate swaps with Deutsche Bank AG (DB) on $1.16 billion worth of bank and insurance trust preferred collateralized debt obligations.
As part of the deal, Deutsche Bank will assume all of the credit risk of this CDO portfolio and pay all interest and principal due to the company. The transfer of credit risk to Deutsche Bank reduces the regulatory capital risk weighting for these investments to 20% compared to the weighted average risk-weighting of 455% on June 30, according to Zions.
"As a result, the transaction is expected to reduce regulatory risk-weighted assets by approximately $4 billion, or approximately 8.4% of the estimated June 30, 2010 balance," said Zions.
-Sue Chang; 415-439-6400; AskNewswires@dowjones.com