Due Diligence Key in Avoiding CDO Pitfalls (Excerpt)

By Martin de Sa'Pinto, Senior Financial Correspondent
Monday, June 04, 2007GENEVA (HedgeWorld.com)

EXCERPT

"CDO deal sponsors—the underwriter and the sellers—are obliged to perform adequate due diligence," observed Janet Tavakoli, founder and president of Chicago-based Tavakoli Structured Finance. "CDO deal sponsors are also obliged to disclose all material information, and cannot withhold information to which only they—and not investors—may have access. If underwriters fail in these responsibilities, they may end up in disputes with investors, albeit investors also have an obligation to perform adequate due diligence." Indeed, she said, investors will walk away from deals if they feel their questions to sponsors haven't been answered in a satisfactory manner.

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