These CDO Names Don’t Cry ‘Wolf’? The CDO comeback is déjà vu for some investors burned by collateralized debt obligations that blew up during the financial crisis

Updated June 9, 2013, 7:49 p.m. ET

These CDO Names Don’t Cry ‘Wolf’

By JEANNETTE NEUMANN

The CDO comeback is déjà vu for some investors burned by collateralized debt obligations that blew up during the financial crisis. But history probably won’t repeat itself in one peculiar way. Creators of the deals are showing little interest in bestowing them with the sort of aspirational, exuberant, mythological, over-the-top and sometimes inexplicable names common before the crisis hit.

Creative License: Names of some CDOs sold to investors before the credit crisis hit

Bonifacius LTD.: “Bonifacius” means “good fate” in Latin

Empyrean Finance: “The highest heaven or heavenly sphere,” according to Merriam-Webster

Pampelonne CDO II LTD.: Refers to a swanky beach in the Mediterranean resort of Saint-Tropez

Sunrise CDO I LTD.: Got the nickname “Sunset” because of losses

Zohar III LTD.: “Zohar” means “brightness” and is the definitive work of KabbalahIn April 2007, investors bought Tourmaline CDO III Ltd. Tourmaline is a gemstone with hues that vary because the stones passed over a rainbow on their journey from the center of the Earth, according to legend. Then came Corona Borealis CDO Ltd., a reference to a constellation that means “northern crown” in Latin.

Several deals were named Coriolanus, which also is the title of a Shakespearean tragedy about a Roman leader killed for his betrayal. Goldman Sachs Group Inc. GS +3.96% had the ferocious-sounding Timberwolf I Ltd.

Fast forward to today. J.P. Morgan Chase JPM +1.44% & Co. and Morgan Stanley MS +6.26% are trying to assemble so-called synthetic CDOs that are expected to deliver high returns for profit-hungry investors, and collateralized loan obligations are selling nearly as fast as banks and other financial firms can create them.

Collateralized debt obligations pool bonds and offer investors a slice of the pool. Synthetic CDOs pool insurance-like derivative contracts on the bonds. CLOs are a type of CDO. Synthetic CDOs are blamed by lawmakers, analysts and some investors for helping deepen the financial crisis.

The names of the most-recent deals are downright dull. Among CLOs issued this year, the splashiest names include Marathon CLO, Symphony CLO Ltd. and Arbor Realty Collateralized Loan Obligation Ltd.

Jeremy Ghose, chief executive of 3i Debt Management, said deal makers now want “conservative names that are more neutral, that are more long-lasting, that can go through various cycles.”

In February, the unit of London investment firm 3i Group III.LN +1.96% PLC sold a $510 million collateralized loan obligation called Jamestown CLO II. Named for the first permanent English settlement in the U.S., Jamestown is meant to evoke longevity, stability and a connection between Europe and the U.S., he said.

Aegon USA Investment Management LLC’s latest collateralized loan obligation, Cedar Funding Ltd., got its name from Cedar Rapids, Iowa, the firm’s hometown, according to a person involved in the naming of the deal. The firm is a unit of Aegon NVAEG +2.53% of the Netherlands.

The riverside city of about 130,000 people is a long way from Malibu, Calif., which inspired the name of a 2005 deal called Malibu Loan Fund Ltd. Aegon wanted a “nice, beach-surfing kind of theme,” the person said. “There’s been no change” at Aegon “in [the] psychology” of picking names, the person added.

Few of the people involved in naming deals then or now will talk openly about the process.

To some analysts and investors, the etymology of these structured-finance deals is a reminder of what has changed, and what hasn’t, since the crisis. While the CDO market is coming back to life, some investors haven’t recovered from billions of dollars in losses that boomeranged around the world.

“Looking at CDO names is like a game of ’20 Questions,'” said Jack Chen, who rated such deals while working as an analyst at Moody’s Investors Service MCO +1.20%from 2001 to 2006 and now runs a structured-finance consulting firm. “Is it a Greek god? Is it a geographic location? Is it a mineral?”

Arturo Cifuentes, a finance professor at the University of Chile and former senior vice president at Moody’s, said “flashy” names conveyed “a sense of something good or stylish. It was like selling luxury items.”

The names usually came from bankers or collateral managers who pieced together the deals. During the boom, so many CDOs and CLOs were being churned out that their creators sometimes struggled to think of something new, according to people who worked on these deals.

“We need some creative juices flowing. Is anybody around here creative?” asked Graham Jones, a Morgan Stanley vice president, in a March 2007 email to five co-workers. His suggestions included Burbage (the last name of an actor who worked with Shakespeare), Sarabi (Simba’s mother in “The Lion King”) and Chalfont (the “first part of the name of the village that I was brought up in”), according to another email.

Philip Blumberg, another Morgan Stanley vice president, had his own ideas that he emailed to colleagues. “How about Nuclear Holocaust 2007-1,” he replied. Other possibilities: “S—Bag 2007-1” and “Mike Tyson’s Punchout 2007-1.”

“Just kidding,” he added. “I like Chalfont 2007-1…it’s a pain to say, but it’s a very special place.” (They went with Stack 2007-1 Ltd.)

The emails surfaced five months ago as part of a lawsuit filed against Morgan Stanley in 2010 by China Development Industrial Bank, which blamed the New York securities firm for losses on an earlier CDO with a similar name.

A Morgan Stanley spokesman declined to comment on the emails and said Messrs. Jones and Blumberg declined to comment. Messrs. Graham and Blumberg didn’t respond to requests for comment.

When the crisis hit, clever names offered no protection against mushrooming losses that left many CDOs nearly worthless. The market for all kinds of highly engineered financial instruments disappeared. Many banks walked away from the business.

Low interest rates now are prodding investors to give CLOs and CDOs a second chance. So far this year, more than $38 billion of collateralized loan obligations have been sold in the U.S., up from $15.6 billion in the same period last year, according toRoyal Bank of Scotland Group PLC. RBS.LN +3.31%

J.P. Morgan and Morgan Stanley are looking to assemble synthetic CDOs at the request of a small number of institutional investors, according to people familiar with the discussions.

The banks declined to comment on what they would name the CDOs.