01/15/2010

Dynamic Credit Layoffs Reflect CDO Retreat

Dynamic Credit Partners, once an active issuer of collateralized debt obligations, laid off portfolio manager Dan Nigro and trader Chris Sandleitner last week amid an ongoing shift in its business.

Dynamic Credit's CDOs once accounted for a big part of its work as an asset manager. With the New York firm's last such deal now more than two years old, it has been turning more of its focus to expanding its structured-product advisory practice. But the advisory work isn't nearly as profitable, leading some market players to predict that more layoffs are coming.

They were particularly surprised by the dismissal of Nigro, who has clocked more than 20 years in the securitization business, including stints at AIG, Ischus Capital and J.P. Morgan. Nigro was among Dynamic Credit's earliest hires when he joined in 2005. But his specialty - acquiring assets for collateralized debt obligations - was rendered largely obsolete amid the credit crisis. Ditto for Sandleitner, who previously had worked at Deutsche Bank and Morgan Stanley.

Dynamic Credit's headcount now stands at 25, down from about 35 in 2007.

For the firm's part, chief executive Jim Finkel denied that more job cuts are in the works. In fact, he said he is in hiring mode. "Our business has changed," Finkel said. "Dan and Chris both did great jobs for us."

For now, their duties are consolidated under David Schwartz, head of Dynamic Credit's advisory business. That team's staff already included CDO specialists Mike Li, Deo Sabino and Mendel Starkman. Now Sumeet Sablok and Alex Suh, asset- and mortgage-backed bond specialists who worked for Nigro, also report to Schwartz.

Two other staffers left late last year: Adam Zivitofsky, a marketing specialist who worked closely with Nigro's team, and Stephen Pennington, head of information technology for consumer-asset bonds handled by the asset-management division.

Dynamic Credit was founded in 2003 by Finkel, who held an executive post on Deutsche's European CDO desk, and Tonko Gast, an ABN Amro alumnus. Pre-credit crisis, the firm was largely focused on managing structured-product pools via hedge funds and a series of collateralized debt obligations issued from 2005 to 2007. The last of the series, a $400 million vehicle called Dalton CDO, was issued in May 2007. Dynamic Credit has fared better than many CDO managers, as five of the nine CDOs it issued remain solvent.

More recently, the firm has taken over management of two other CDOs: Petra Capital's Brookville CDO and a Summit Investment deal. Dynamic Credit continues to seek management assignments, but progress has been slow.

That has forced the firm to rely more heavily on its advisory work, which includes helping fund managers and other investors analyze and assign values to holdings and prospective purchases of structured products. But it faces strong competition, as many once-high-flying fund managers have attempted to recast themselves as advisors in the aftermath of the credit crisis. Dynamic Credit currently is recruiting marketing and business-development specialists to sell its services.

Nigro and Sandletiner couldn't be reached for comment.

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