Results for Auctions of CDOs

Collateralized Debt Obligations (CDOs) are asset-backed securities constructed from a pool of fixed-income securities. CDOs are typically divided into tranches and any losses in the underlying securities are taken first by the most junior tranches and last by the most senior tranche. All except the first loss (most junior) tranches are rated by one or more rating agencies.

Types of collateral used to back CDOs include (but are not limited to) corporate bonds, real estate investment trust (REIT) debt, other asset-backed securities such as mortgage-backed securities, and commercial real estate debt. This overview is a very limited, general discussion and description of CDOs. Specific terms of the CDOs offered in the auction will vary. For more information, please consult the relevant offering materials available on the Zions Direct auction site for each CDO security and contact the Issuer of the CDO if you have more questions.

CDOs offered through Zions Direct, a member of FINRA/SIPC, and a non-bank subsidiary of Zions Bank, are not insured by the FDIC or any federal or state governmental agency, are not savings accounts, deposits or other obligations of, or guaranteed by, Zions Bancorporation or any of its bank or non-banking affiliates, and may be subject to investment risks, including the possible loss of principal value or amount invested. Each prospective Bidder should seek their own independent professional advice with respect to tax, legal and financial matters before making any investment decision.

Eligible Bidders

Bidding on CDOs is restricted to Qualified Institutional Buyers that are also Qualified Purchasers. A Qualified Institutional Buyer generally is an institution with at least $100,000,000 of assets under management or a registered broker-dealer owning and investing at least $10,000,000 in securities of non-affiliates. A Qualified Purchaser, generally, is an entity with at least $25,000,000 of investments.

Distressed CDOs

Receipt of cash flows by investors is based on the performance of the underlying collateral. In some cases, depending on the tranche seniority, the CDO structure, defaults and deferrals of the underlying collateral and other factors, the CDO may be unable to pay or be precluded from paying investors certain cash flows. Over time, if senior tranches are paid down, it is possible that more junior tranches could eventually receive interest and principal payments. At this time, all CDOs being sold in Zions Direct auctions are considered distressed. It is possible that you could suffer a complete loss of your investment in a CDO sold in a Zions Direct auction. Please consult the relevant CDO offering materials for further discussion of risks relating to investing in these securities.

The offering materials and other information related to the specific Issuers and the CDO securities to be sold in an auction are not of a recent date and were not prepared or independently verified by Zions Bancorporation or Zions Direct and neither of such parties is responsible for the content thereof. Zions Bancorporation and Zions Direct are not providing any information relating to the issuers of the CDOs or the specific CDO securities other than such information prepared by others and have no responsibility or liability for the completeness or accuracy of such information prepared by others or any misstatements of material facts included therein or omissions of material facts therefrom.

Online Auction

The CDOs are sold in an online auction. The auction platform was developed by Grant Street Group, a well-established provider of online securities auctions. The auction is a modified Dutch auction similar to that used by the U.S. Treasury. All winning bidders pay the market-clearing price. Unlike Treasury auctions, which use sealed bids, CDO bidders see the market-clearing price during the auction and know whether they are currently in a winning position. All CDO units will be sold provided that the auction is fully subscribed.

Bidders bid on price as a percentage of the original par value of the CDOs. The minimum bid is one basis point (0.01%). A bid of one basis point equates to a bid of $25.00 for CDOs with an original par value of $250,000.

CDO auctions have a two-minute rule that extends the auction period by two minutes from the time a bid is submitted that changes the market-clearing price, beginning in the final two minutes of the auction and extending until two minutes have elapsed with no change in price. The two-minute rule extension is limited to a maximum of fifteen minutes. See the CDO Auction Process and Zions Direct Auction Rules for additional information.

Unit Size

Investors in these CDOs are required to hold a minimum of $250,000 of original par value. As a result, in Zions Direct’s auctions of CDOs, the CDOs are sold in units equal to $250,000 of original par value, also known as the original balance. The original par value does not necessarily equate to the current principal balance; the balance may have been reduced by principal payments made and/or the balance may have been increased due to the capitalization of interest. Bidders should consult information providers (e.g. Bloomberg) to determine the current principal balance of the CDO tranches, and should rely on their own analysis to determine their estimate of the value of the securities and their auction bidding strategy.

Settlement

CDO securities purchased in a Zions Direct auction will be settled on day T+3. Individual bidders will need to have an active Zions Direct account into which the securities will be delivered. Institutions must provide delivery instructions.