CDOs on the brink of collapse: report

A move by the United States government to seize the main subsidiary of American mortgage insurer PMI Group, along with the broader struggles in the US housing market, have put hundreds of millions worth of collateralised debt obligations (CDOs), distributed exclusively in Australia, on the brink of collapse, according to a report by the Australian Financial Review.

The issue came to a peak yesterday when it became increasingly likely that three CDOs in particular-- Torquay, Scarborough and a portion of the Parkes CDO, would collapse, an event that would cost Australian investors up to $250 million.

Councils, charities, churches and wealthy individuals are particularly exposed to CDOs, with the City of Melville, in Perth, among the most exposed, with nearly $5 million invested.