http://www.abalert.com Asset-Backed Alert en-us Copyright 2000-2007 Harrison Scott Publications. All Rights Reserved. Thu, 11 Mar 2010 07:09:55 -0700 60 http://www.abalert.com/headlines.php?hid=68803 Following a period of rapid growth, trading firm ICP Capital is suddenly grappling with a range of issues including troubles in raising capital and retaining key personnel. Related tensions boiled over two weeks ago, when chief executive Thomas Priore got into a shouting match with lieutenant Carlos Mendez in the firms New York headquarters. Mendez abruptly quit. Shortly after, Mike Flynn, Robert Roberto and Ed Steffelin headed for the door as well. ICP runs two main lines of business: a broker-dealer arm focusing on structured products and an asset-management division that works on collateralized debt obligations, operates funds and advises clients. Mendez had built the brokerage area into the companys most profitable component, while the asset-management unit has struggled under Priores watch. Its unclear what specific issue triggered the altercation between the two, but it was just the latest in a series of setbacks for ICP. The firm has doubled its staff during the past 18 months to about 120 employees, but now faces trouble retaining some of the recent hires. A number of traders and sales specialists on the brokerage side signed on with the expectation that ICP would raise capital so it could build an inventory of structured products. So far, however, the firm has made little progress with that effort. A similar issue plagued Utendahl Capital, which hired a team of structured-product traders only to see most of them leave late last year after the New York firm failed to raise... http://www.abalert.com/headlines.php?hid=68544 Two Highland Capital partners are trying to purchase trust-preferred securities issued by a bank they partially own - shares that currently reside in the underlying portfolio of a collateralized debt obligation. The unnamed individuals, operating through an entity called Highland Capital Management Services, are angling to buy $15 million of NexBank securities from a Bear Stearns deal called Soloso CDO, 2007-1. They're offering to pay 12 cents on the dollar. The Highland partners are also offering almost $1.6 million of additional incentives to owners of Soloso's equity to permit the maneuver - taking advantage of a structural twist in which the issue's voting power lies in the hands of first-loss investors. In doing so, they could pit senior bondholders against subordinate classes. Like many investors in trust-preferred CDOs, Soloso's equity holders long ago stopped receiving payments due to weakened collateral performance. So it would seem they have nothing to lose by accepting the Highland partners' proposal. Owners of the issue's senior bonds, who stand to lose millions of dollars on the trade, decry the proposal as unethical and a violation of the spirit of deal documents. They do have some recourse though. The offer gives senior noteholders possible veto power, which a few have already exercised. Investors have until March 12 to weigh in, according to a Feb. 19 report from trustee Wells Fargo. The motivation of the Highland partners remains unclear. One source said the... http://www.abalert.com/headlines.php?hid=68565 Stanfield Capital is thinking about unloading the management assignments for 12 collateralized loan obligations. The firm has so far spoken to a few possible buyers in hopes of gauging interest in such an offering. If it moves forward, the effort would mark one of the largest in a string of similar sales that have taken place in the aftermath of the credit-market collapse. It would also eliminate a large chunk of Stanfield's business. Stanfield, which focuses on leveraged-loan investments, runs 17 collateralized debt obligations overall. The contracts it is currently pitching encompass 11 all-cash issues and one synthetic transaction backed by leveraged loans. The other six, underpinned by loans and perhaps other assets, could go up for grabs as well. CLOs had come to be an increasingly important part of Stanfield's business over the years. The New York firm, founded in 1998 by Stephen Alfieri and Christopher Jansen, used to have a hedge fund operation. But Chris Pucillo spun off that business in 2007 to form Solus Alternative Asset Management. Now Stanfield runs some $5 billion through various loan vehicles, of which $4.6 billion is in its CLOs. Separate accounts make up part of the remainder. Stanfield's move to pare back its CLO-management business comes amid a stream of similar offerings that has been growing in recent months, in part because many sellers no longer find the business appealing. For Stanfield's part, the firm apparently wishes to capitalize on a bounce-back in the values of CLOs from their credit-crisis... http://www.abalert.com/headlines.php?hid=68202 The Federal Reserve is increasing its scrutiny of banks that distribute bonds via its Term Asset-Backed Securities Loan Facility, on the eve of the program's expiration. The reviews, focusing on adherence to quot;know-your-clientquot; requirements among TALF agents, apparently kicked into high gear a few weeks ago as the Fed began a post-mortem on the program. Dealers found to be out of compliance will face audits and possible disciplinary actions from the central bank. The final round of monthly TALF financing is set to go out March 4. For dealers of eligible bonds, the amped-up Fed inquiries they are receiving ahead of that date are creating a sense of relief that the program has almost run its course. quot;I personally can't wait for TALF to end. Most of us are thankful there's only one round left,quot; one banker said, adding that he and many of his peers have been overwhelmed with paperwork related to the so-called KYC rules. He said the Fed's requests have gone beyond the information dealers might reasonably expect to supply. For example, some agents have been asked to report investors' electricity costs. Meanwhile, the fear of Fed audits and the negative publicity that would come with them is prompting many TALF agents to shut out what they call bottom-feeder investors from new offerings. Those shops include opportunistic buyers that formed over the last year. quot;It has become too risky to keep these guys in it for some agents,quot; one underwriting professional said. The reduced investor base likely explains why the most recent dose of... http://www.abalert.com/headlines.php?hid=68225 The American Securitization Forum's annual conference won't return to the Washington area if industry players get their way. This year's version of the event, quot;ASF 2010,quot; took place Jan. 31-Feb. 3 at the Gaylord National Hotel in Oxon Hill, Md. By the time it wrapped up, many of the summit's 4,400 registrants had come to the conclusion that a change of venue should be on the agenda for 2011. The main reason: Most feel the winter gathering should take place in a warmer climate, preferably somewhere with more places to entertain clients. So where would market participants prefer to go Many are calling for a return to Las Vegas, where the conference took place the four previous years. Some suggest Scottsdale, Ariz., where it was staged for two years before that as the successor to a long-running confab put on by Strategic Research Institute. ASF, meanwhile, has posted a brief survey on its Web site in which conferencegoers can weigh in on 16 possible cities for next year's conference. It's under the quot;Featured Eventsquot; listing at americansecuritization.com, and an e-mail version is slated to go out to 2010 attendees today. ASF executive director Tom Deutsch said the feedback he receives will ultimately determine next year's location, and that a decision is likely by the end of February. Arizona is already out of the running, however, as there are no hotels in the state that can house such a large assemblage. As for Washington, it didn't help that temperatures during this year's event never rose above freezing or... http://www.abalert.com/headlines.php?hid=67826 More credit-card bonds will mature in 2010 than in any prior year, but that doesn't mean issuers will be rushing to re-fund those obligations with new securities. According to Moody's, $100 billion of card bonds come due this year, up from $81 billion in 2009. In the past, that would have pointed to a corresponding jump in issuance as lenders sought to roll the underlying accounts into new deals. But not this year. Moody's estimates that only $50 billion of fresh credit-card securitizations will hit the market in 2010. That would register as an increase of less than 10 from last year's U.S. total of $45.6 billion, according to Asset-Backed Alert's ABS Database. Many of the factors limiting growth have long been on the minds of market players. First and foremost is the Jan. 1 implementation of the Financial Accounting Standards Board's FAS 166 and 167 guidelines. Those rules effectively ended off-balance-sheet treatment for securitized credit-card accounts, thus reducing the appeal of asset-backed bonds as a funding source. Many issuers have been exploring possible alternatives. Still-shaky economic conditions and steps by issuers to weed out weak borrowers have also cut into the volume of card debt outstanding, reducing the need for issuers to re-fund maturing securitizations. Some issuers plan to stay out of the market entirely. Continuing a stance it maintained throughout 2009, for instance, Capital One doesn't expect to issue heavily this year even as $9.9 billion of its asset-backed bonds come due. ... http://www.abalert.com/headlines.php?hid=67644 Dealer-floorplan lenders are preparing an onslaught of securitizations. The offerings are expected to hit the market in two big batches, one in the first week of February and the other in early March, in order to qualify for the two final monthly rounds of buyer financing available through the Federal Reserve's Term Asset-Backed Securities Loan Facility. TALF's next funding rounds go out Feb. 5 and March 4. Most of the upcoming deals would be backed by loans that help car dealers finance their inventories. Ford, which is typically among the most prolific issuers of such securities, is expected to be behind at least two of the transactions. BMW and Hyundai are also preparing offerings, as is General Motors affiliate GMAC. There's speculation that Chrysler Financial is interested as well, although the source of its receivables remains unclear. When affiliate Chrysler entered a government-brokered bankruptcy arrangement last April, all of its dealers agreed to shift their floorplan financing to GMAC. But the still-solvent Chrysler Financial continued to hold a loan inventory that it might now hope to securitize. Or it could be trying to raise money to revive its floorplan business. Outside auto-related issues, GE Capital appears to be lining up a deal. Most of its floorplan securitizations have been backed by loans to dealers of recreational vehicles. Why the urgency to get in on TALF's final rounds With the auto industry on unsteady ground, investors are reluctant to... http://www.abalert.com/headlines.php?hid=67464 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. quot;Our business has changed,quot; Finkel said. quot;Dan and Chris both did great jobs for us.quot; 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 Starkm... http://www.abalert.com/headlines.php?hid=67485 Barclays, RBS Greenwich and Stifel Nicolaus are separately arranging sales of home loans that the FDIC took on amid the global financial crisis. The so-called structured sales, which industry players have been anticipating for months, would be part of a multi-pronged plan by the FDIC to unload a mix of assets held by some of the 168 depository institutions it has seized since mid-2007. Details of the mortgage sales are just coming to light. In many instances, the FDIC would transfer a portfolio of prime-quality or subprime loans to a special purpose vehicle and then sell a senior interest in the entity to the highest bidder. The buyer would also take an equity stake of 30-50, with the deposit insurer keeping the remaining equity. In some cases, the FDIC would offer low-cost financing to the winning investor. RBS is currently shopping $500 million of mortgages from several failed banks, while Stifel Nicolaus works to bring two offerings of some $500 million and $1 billion to market by March 31. Barclays' auction has similar characteristics. The offerings could help clarify the FDIC's overarching strategy for shedding seized assets. Barclays, RBS and Stifel Nicolaus were among a number of institutions designated by the insurer to help unload various holdings from failed banks following the credit-market blowup, as were Deutsche Bank, HSBC, Keefe Bruyette amp; Woods and Pentalpha Funding. So far, eight structured sales have taken place under the initiative. Each entailed only a single type of... http://www.abalert.com/headlines.php?hid=67157 Manheim Financial has postponed a planned securitization in response to waning investor demand, on the heels of a similar move by Ford. Both companies now intend to bring their offerings to market early next year, when investor interest is expected to rebound. Manheim's offering would be its first. The Atlanta company, which offers floorplan financing to car dealers and auto-rental businesses in the U.S. and Canada, had begun preliminary marketing efforts earlier this month with Barclays on board as bookrunner. It pulled back last week, as buysiders headed to the sidelines for the rest of the year. A source said Manheim isn't desperate for funding, and believes an early-2010 deal would offer a lower cost of capital. Ford was marketing an auto-loan issue in late November that would have qualified for buyer financing under the Federal Reserve's most recent round of Term Asset-Backed Securities Loan Facility funding, which went out Dec. 3. It held off after investors demanded wider spreads than it expected. The moves underscore a trend that has been taking shape for about a month. Investors, who usually tone down their buying around yearend, stepped away a few weeks earlier than usual this year to lock in gains. Issuers, however, kept pitching transactions. The result was a supply-and-demand imbalance that has caused funding costs to rise. One banker said buyers are also looking for any possible flaw or worst-case scenario to justify wider spreads. Issuers that don't need immediate funding are now... http://www.abalert.com/headlines.php?hid=66980 Companies that rely on commercial-paper conduits for funding are getting innovative in a late-year scramble to make sure their receivables continue to receive off-balance-sheet treatment. The efforts represent some of the latest maneuvers stemming from the Financial Accounting Standards Board's FAS 166 and 167 rules, which among other things will force banks that run conduits to bring those vehicles' assets onto their books beginning Jan 1. Now businesses that draw financing from those entities are awakening to the possibility that they too may face balance-sheet impacts. Their response is to propose changing the way they supply credit enhancement for asset pools sold to conduits, mainly trade receivables. Take a $1 billion batch of receivables as an example. Right now, a company that wants to sell those assets to a conduit while kicking in enhancement of, say, 10, would hand over the full $1 billion portfolio while getting back $900 million of up-front funding. The remaining $100 million would protect conduit investors as over-collateralization. Under current FASB guidelines, the over-collateralization would remain on the seller's books while the rest would come off its balance sheet via a so-called true sale. But the new rules would essentially treat the funding as a loan, while negating the seller's true-sale status and possibly forcing it to keep all $1 billion of assets on its books. The suggested work-around is to still get the $900 million up-front, while replacing the over-collateralization with a junior... http://www.abalert.com/headlines.php?hid=66768 Nomura is apparently putting its money where its mouth is. Pushing forward with efforts to become a major broker of structured products in the U.S., the Tokyo bank has been trying to entice salesmen and traders capable of leading the effort by offering them guaranteed one-year contracts of $3 million to $5 million. Those packages, consisting of both salary and bonus payments, are worth about double what the targeted candidates are currently earning. Lower-level recruits are also getting sizeable raises. For example, a vice president who just joined Nomura's mortgage-bond trading desk got a 120 pay hike for the upcoming year. And a managing director was guaranteed $1.5 million, up from a projected $1 million at his former employer. The exact terms of Nomura's contracts are still the subject of speculation at this point, but some of the richest ones apparently are being fashioned for group heads who would arrive with the beginning of the 2010 calendar year. And while Nomura has been generous with structured-finance recruits who are already on board, it evidently has only recently upped the ante to current levels. It's also difficult to say exactly how much specific personnel are taking home. Nomura began building a structured-finance group from scratch in March as part of a broader push to boost its presence in the fixed-income market. Since then, it has built a securitization staff of about 30. A layer above the group heads Nomura is now seeking, the bank brought in longtime structured-product trader... http://www.abalert.com/headlines.php?hid=66680 The FDIC has hired at least three firms to help review or assign values to seized bank assets, including receivables it plans to securitize. The contractors - including Clayton of Shelton, Conn.; RER Financial of Herndon, Va.; and Thompson, Cobb, Bazilio amp; Associates of Washington - are each charged with assessing a growing inventory of residential and commercial mortgage bonds and loans that the FDIC has been taking on from failed banks. A few other shops are believed to have won similar assignments. In part, sources familiar with the FDIC believe the mandates mark an initial step toward carrying out an already-developing plan to unload some of the assets through securitization. The expectation is that the deposit insurer will start by selling bonds backed by home loans early next year, and then possibly move on to repackage mortgage securities into instruments resembling collateralized debt obligations. Many of the loans and bonds would also be tabbed for so-called structured sales, in which the FDIC retains an interest in the underlying assets by forming partnerships with private-sector investors. The FDIC has already sold some non-performing loans, although the exact natures of those transactions are unclear. Clayton, RER and Thompson each landed their assignments within the last couple of weeks, with an official at one of the firms describing his work as quot;due diligence and valuation services on assets for sale.quot; The source said his mandate focuses on structured sales, but that the evaluations he and some... http://www.abalert.com/headlines.php?hid=66406 Babson Capital has agreed to purchase a Jefferies Capital unit that manages five collateralized loan obligations. With the takeover, Babson will assume management duties for the issues: St. James River CLO; Clear Lake CLO; Diamond Lake CLO; Summit Lake CLO and Victoria Falls CLO. The MassMutual Financial subsidiary will also absorb the personnel running those deals - a group that encompasses fewer than 10 people. The CLOs involved were issued from 2005 to 2007 and have a total face value of $1.8 billion. Unlike some deals that lately have undergone management changes, they have performed well. The sale is set to go through shortly, after the CLOs' investors approve the management transfers. The arrangement would largely remove Jefferies from the CLO-management business. Aside from the assignments it is shedding, the New York broker-dealer only runs one such transaction - through a business-lending venture called Jefferies Finance that it launched in partnership with Boston-based Babson in 2004. Jefferies' motivation for selling its CLO operation stems from efforts by parent Jefferies amp; Co. to focus on its investment-banking activities, including work on securitizations. The company has been expanding its banking teams for more than a year, and apparently didn't consider CLO management a big part of its franchise. It also gets to share some revenues with Babson going forward. Babson, for its part, already ranks among the largest CLO managers with almost two dozen deals under its wings. It sees the takeover as a play... http://www.abalert.com/headlines.php?hid=66224 Marathon Asset Management pocketed millions of dollars over the past few months by buying back securities from a collateralized debt obligation it issued in 2005 and then retiring them at higher prices. The move has rankled market players. They say the tactic is untoward at best - and illegal at worst - as it was based on allegedly concealed information and could result in losses for junior bondholders. The deal in question is Marathon CLO 1, which had an original balance of $330.1 million spread among several senior and junior classes. At some point this year, Marathon repurchased most or all of the issue's triple-A-rated senior notes from Bank of America at prices that industry participants peg at 85 cents on the dollar. At the end of September, the New York firm, in its capacity as the CLO manager, started liquidating the transaction's underlying leveraged loans with the intention of using the proceeds to retire the repurchased senior classes at par. That money started flowing to Marathon on Oct. 26. The CLO had two senior classes with a total face value of about $245 million, little of which had previously been paid off. The quick turnaround netted Marathon more than $40 million, by some estimates. Where does that leave junior investors According to a report issued by trustee Bank of New York on Oct. 16, Marathon liquidated about two-thirds of the remaining collateral for the deal - assets with a face value of almost $219.2 million - from the end of September to the middle of October. The sa... http://www.abalert.com/headlines.php?hid=66026 Ford is planning a substantial boost in its securitization volume. In recent talks with underwriters, representatives from the automaker have indicated that they expect its 2010 output of securities backed by prime-quality auto loans, leases and dealer-floorplan credits written in the U.S. to total some $14 billion. That would mark Ford's busiest year as an asset-backed bond issuer in the States since 2005, when it weighed in with $14.5 billion of deals, according to Asset-Backed Alert's ABS Database. The company then followed up with $10.7 billion of transactions in 2006, $5 billion in 2007 and $9.9 billion in 2008. So far this year, Ford has sold $9.2 billion of asset-backed securities. But with the lone exception of a $500 million floorplan-loan transaction in June, all of its 2009 issues have been aided by buyer financing made available through the Federal Reserve's Term Asset-Backed Securities Loan Facility. Now, with TALF set to stop offering new investor support in March, Ford's latest volume projections suggest a bullish outlook on its business in general. The approach is reinforced by increasing market share, as Ford gains on sales leaders General Motors and Toyota. Increased third-quarter sales also came as a positive sign, even if those figures were buoyed in part by the federal government's now-expired quot;cash-for-clunkersquot; program. Stock analysts are even predicting that the Dearborn, Mich., company will break even for the third quarter, which would... http://www.abalert.com/headlines.php?hid=66047 Could the commercial-paper conduit industry vanish in 2010 While the thought has been in the backs of many market players' minds for years, it has lately come to be seen as less of an extreme view and more of a real possibility. That's because there's a growing sense that nothing will be done to temper the effects of the Financial Accounting Standards Board's pending FAS 166 and 167 rules. quot;We may be going to zero,quot; one investment-bank staffer said, referring to the volume of conduit paper in the hands of investors. Ever since FASB started work on the earliest precursors to its new accounting guidelines six years ago, industry pessimists have warned of a chilling effect on the market. Now set to take effect Jan 1, the rules would end off-balance-sheet treatment for assets securitized by banks and certain vehicles they run - including conduits. The upshot would be a vast increase in the amounts of reserve capital those institutions have to hold, which could drive up conduit-related funding costs to uneconomical levels virtually across the board. Many securitization specialists were until recently holding out hope for a reprieve. It's ultimately up to the FDIC and Federal Reserve to dictate how capital should be set aside against on-balance-sheet conduit assets, and market professionals have been pushing hard for relaxed or at least clarified rules. It wasn't until now, with the implementation date in sight, that even previously bullish players have started losing hope. quot;There is a f... http://www.abalert.com/headlines.php?hid=65508 Leverage is trickling back into the mortgage-securitization market. In a move that is already buoying bond prices, and could hurt smaller competitors, large Wall Street institutions including Bank of America, Citigroup and J.P. Morgan have begun financing client purchases of home-loan securities on the secondary-market. Some mid-size institutions have been in on the act too, including Jefferies amp; Co. To be sure, leverage still isn't widely available to mortgage-bond buyers. Indeed, the banks have just begun to creep back into the business in recent weeks. But any willingness to help investors buy on margin signifies a drastic change in sentiment. As credit-market conditions began deteriorating in mid-2007, banks trimmed the amounts they were willing to lend to hedge funds and other leveraged buyers of mortgage bonds. And when the financial crisis hit new depths a year ago, the institutions all but cut off the flow of leverage. The result was that already-slow mortgage-bond trading became paralyzed. Now, the opposite is happening. Secondary-market prices for non-agency mortgage bonds had already rallied sharply in recent months as buysiders prepared for the launch of the U.S. Treasury Department's Public-Private Investment Program. PPIP has presumably contributed to the banks' more-bullish view as well, and the resulting availability of leverage from those players has pumped a gust of wind into the market's sails. The effect has been greatest for the cleanest... http://www.abalert.com/headlines.php?hid=65527 ---------- CORRECTION: Credit Suisse insists that it has no plans to downsize or eliminate its asset-backed commercial paper distribution desk, contrary to what appeared in the Oct. 9 article quot;Conduit Distribution Pros Face Downsizing.quot; A wave of staff reductions is looming for dealers of asset-backed commercial paper. While professionals who distribute commercial-paper conduit offerings have been hit by some of the same broad shakeouts as their peers amid the global financial crisis, industry players say they're now under consideration for more targeted cuts. Many are pointing to Citigroup as a candidate to move first, perhaps sacrificing its status as one of the busiest shops in the business. Sources said that other institutions with smaller dealer desks, including Credit Suisse and Deutsche Bank, could pull back as well. But whether that means a downsizing of their dealer operations, or their outright elimination, remains to be seen. The expectations stem in part from capital-reserve formulas that will take hold with the Financial Accounting Standards Board's new FAS 166 and 167 rules at yearend. More generally, dealers are feeling pressure from more than two years of contraction in the conduit market, from peak outstandings of $1.2 trillion in August 2007 to about $500 billion now. While conduit-dealer desks have shrunk to some extent during that time, there's a sense that those shops still employ far too many... http://www.abalert.com/headlines.php?hid=65191 There's always next year. Heading into the fourth quarter of 2009, market players don't foresee a surge in securitization volume that would put annual deal output even close to last year's worldwide total of $1.35 trillion - marking the industry's third consecutive year of contraction. However, hope is brewing for a slightly more robust 2010. So far this year, issuers around the world have placed $653.5 billion of new asset-backed securities, collateralized debt obligations and residential and commercial mortgage bonds, according to Asset-Backed Alert's ABS Database. That measures out to a decline of 20 from the year-ago tally of $815.8 billion. In some ways, that could be taken as an early hint of a recovery. Indeed, after a relatively strong start, new-deal flow lagged in the second quarter and eventually fell nearly 30 behind the mid-2008 total. Looking into 2010, the gap might close even further as buyers that took on distressed home loans early in the credit crisis start carrying out plans to package rehabilitated accounts into new quot;scratch-and-dentquot; bonds. The expectations come partly in response to recent improvements in the performance of those players' holdings, said Scott Eichel, who co-heads global securitization trading at RBS - the world's most active underwriter of securitized products. Outside the home-loan sector, there is a growing sentiment that buysiders have become more willing to take on risk. That's... http://www.abalert.com/headlines.php?hid=65210 Samp;P is temporarily curtailing the volume of new ratings it assigns to asset-backed bonds issued by banks. The retreat appears focused on credit-card securities, given their prevalence among bank-issued transactions. However, the agency still plans to grade a few such deals in the near term. At issue is a longstanding lack of clarity about how bank insolvencies might play out after Jan. 1, when banks must start booking securitized assets on their balance sheets under the Financial Accounting Standards Board's pending FAS 167 rules. Samp;P apparently feels that before it gets back to business as usual, it needs to know more about how the FDIC plans to treat bond collateral tied in those scenarios. The agency, like many other players in the securitization industry, is concerned that the FDIC could seize securitized assets to re-pay other creditors of failed banks. Such actions are currently blocked by true-sale accounting procedures, in which issuers gain bankruptcy-remote status for their assets by transferring them to special purpose vehicles used in securitizations. But that treatment will vanish for banks with the implementation of FAS 167. While the concern certainly isn't limited to Samp;P, it is the only rating agency that has taken action. An executive at another agency said he believes the FDIC will clarify its intent well before FAS 167 kicks in, and thus doesn't see the need for a similar move. quot;I would be surprised if [the FDIC] didn't put something out,quot; he said.... http://www.abalert.com/headlines.php?hid=65088 Fears that the Financial Accounting Standards Board's FAS 167 rules would push issuers out of the asset-backed bond market are beginning to be realized. As banks formulate their funding plans for 2010, Bank of America, Capital One, J.P. Morgan and other institutions are coming to view securitization as a less-appealing capital source - given projections that the new accounting guidelines would vastly increase the reserves associated with such deals. The expectation is that they will curtail their issuance activity next year as a result. While the accounting provisions laid out in FAS 167 will apply to all types of asset-backed bonds issued by banks, the impact is likely to be most significant for credit-card securitizations from the largest institutions, in part because of their prevalence in the market. A pending rule change by the FDIC is also diminishing banks' interest in credit-card securitizations. That switch would remove a safe-harbor provision that currently protects securitized card receivables from seizure by the deposit insurer in the case of a bank receivership. Without that insulation, it would be difficult for banks with anything less than stellar unsecured-debt ratings to obtain triple-A grades for their card-backed bonds. The FASB rules are still taking center stage, however. At issue is how banks would have to hold capital against securitized assets that currently get off-balance-sheet treatment, but would be brought onto their books under FAS 167. While the guidelines were finalized June 12,... http://www.abalert.com/headlines.php?hid=64911 ---------- CORRECTION:The July mortgage-bond defaults cited in a Sept. 11 article, quot;MBS Losses Grow Murky as Defaults Rocket,quot; included classes of bonds that Samp;P had earlier downgraded to quot;Dquot; and then confirmed at that rating during the month. Of the 2,996 defaulted tranches, 881 had their ratings lowered in July, compared to 289 in July 2008. The rest of the July 2009 tally consisted of confirmations of previous downgrades. In the first seven months of this year, Samp;P downgraded 7,233 tranches of home-loan securities to quot;Dquot; while confirming such ratings for 7,624 classes. ---------- Holders of home-loan bonds are absorbing a one-two punch - deals are defaulting at a rapidly increasing rate, and it has become more difficult than ever to estimate the severity of losses on those holdings. In July alone, Samp;P downgraded 2,996 classes of securities backed by prime-quality mortgages, subprime home loans and home-equity credits to quot;D,quot; declaring them in default after missing scheduled payments. That's up from 143 tranches that the agency downgraded to quot;Dquot; in July 2008. That jump punctuates a trend in which the number of mortgage-bond classes slipping into default each month has been soaring since late 2007. In the first seven months of this year, Samp;P downgraded a whopping 7,624 tranches to quot;D.quot; Before that, it had declared 1,585 tranches in default, according to data the agency compiled for Asset-Backed Alert. More than half of the tranches that defaulted in the... http://www.abalert.com/headlines.php?hid=64763 Private equity firm Kidd amp; Co. has devised a novel securitization strategy that would finance investments in distressed-company debt. As part of the plan, Kidd's investment-banking affiliate, Glenville Partners, is putting together a team of professionals to help execute the deals. Leading the group is managing partner Sean Byrne, who arrived last month from J.P. Morgan. He has already hired sales specialists James Powers and Zoltan Adam, and intends to bring another 6-10 staffers on board in the coming weeks. The crew has two issues in the works so far, and anticipates a steady flow going forward. Kidd expects the initial deals to hit the market in 3-6 months. One, backed by loans to a finance company, would total $50 million to $100 million. The other, involving a medical-equipment leasing business, would be in the neighborhood of $30 million to $50 million. Both would be privately placed with a small group of investors, and whether they'll carry any ratings will depend on the demands of prospective buyers The securitization initiative dovetails with Kidd's typical strategy of taking control of troubled companies by buying their debt, including nonperforming obligations, often for just cents on the dollar. The firm, which has 35 years of workout and turnaround experience, then aims to get the businesses back on track via operational improvements. The goal is to exit the positions in 3-5 years. The planned bond offerings would add a twist, with Kidd aiming to get its acquirees' loans performing again through its... http://www.abalert.com/headlines.php?hid=64482 U.S. government officials are aiming for September to decide once and for all how banks' capital reserves should reflect a tidal wave of securitized assets that are headed for their balance sheets. The landmark ruling, from the FDIC, Federal Reserve, Office of the Comptroller of the Currency and Office of Thrift Supervision, would mark one of the final steps in determining the impact of the Financial Accounting Standards Board's FAS 167. At issue are the costs issuers incur in tending to huge volumes of already-securitized assets, and when, or if, securitization might re-emerge as a popular funding source. The timing of the government's planned decision fits in with ongoing attempts to prepare for the implementation of the FAS 167 guidelines. Those long-developing rules, finalized this year, followed a previous decision to eliminate an accounting designation for bond-issuing vehicles known as qualified special purpose entities - which issuers have long employed to remove securitized assets from their balance sheets. Instead, the quot;primary beneficiaryquot; of each securitization, typically the issuer, would have to list the collateral on their books beginning in January. But it's up to the government to decide how banking institutions would have to set aside capital against those assets. Under current rules, banks would be exposed to full withholding requirements immediately upon quot;consolidatingquot; their assets - instantly killing one of the most advantageous aspects of asset-backed bond sales while forcing them to... http://www.abalert.com/headlines.php?hid=64501 The U.S. Treasury Department has quietly notified the nine asset-management groups chosen to set up funds under its Public-Private Investment Program that the effort's timetable has been pushed back by at least a month. When the Treasury announced the selection of asset managers on July 8, it said the plan was to have the program up and running in early August. But government officials are still nailing down key details of the initiative, and some of the managers are behind schedule in raising the required minimum of $500 million each from private-sector investors - money the government will match dollar for dollar. The managers were told this week not to expect to begin investing before Labor Day. Under the program, originally announced in March, the fund managers will pool public and private capital to buy distressed mortgage assets that are currently cluttering bank balance sheets. The funds now set to launch in September would invest in both residential and commercial mortgage bonds. A separate loan-buying component run by the FDIC, meanwhile, remains without a timeline. Some of the fund managers are blaming the delay of the distressed-securities effort on hold-ups at the Treasury, which is still working out critical details of the program and has yet to distribute legal documents. The participating firms, for example, are still waiting for guidance on what types of collateral they should target in their mortgage-bond purchases - including whether the Treasury would prefer them to focus on residential or... http://www.abalert.com/headlines.php?hid=64183 The Federal Reserve is thinking about increasing the down payments it requires from investors that buy certain types of bonds with financing from its Term Asset-Backed Securities Loan Facility. The new policy would apply to securities backed by auto loans and leases, and possibly credit cards. The intent would be to wean the strongest issuers in the most liquid asset classes off the program, while re-directing the central bank's resources to the areas in greatest need of help. For auto lenders, such a move would appear to have the most dramatic impact on foreign issuers, like Honda and Nissan, that are seen as being on a better footing than U.S. rivals Chrysler, Ford and General Motors. But the Fed is taking a cautious approach, as efforts to discourage TALF issuance by the most stable automakers could also make it harder for their shakier peers to access the market. A securitization professional who used to work for one of the Detroit Three said the Fed might simply increase down payments for bonds whose underlying borrowers have the highest average credit scores, as those accounts are most prevalent among the healthiest automakers. The down payments, expressed as haircuts, currently take several forms based on duration and asset type. For example: 9 of the amount purchased for three-year securities backed by prime-quality loans, 12 for three-year subprime-loan bonds and 13 for comparable prime leases. But changes to those formulas would be lined with potential pitfalls. quot;The Fed cannot be viewed as target... http://www.abalert.com/headlines.php?hid=63989 An anticipated gush of selling could cause the values of mortgage-related bonds to whipsaw in the coming months. Industry players are looking ahead to a logjam of secondary-market offerings, as troubled collateralized debt obligations and structured investment vehicles are forced to liquidate portfolios of home-loan bonds. Healthier players are likely to unload inventory as well. The upshot is that supply has a strong chance of exceeding demand, which could wipe out recent gains in the prices of mortgage securities. Troubled CDOs with an estimated face value of $50 billion are expected to enter liquidation in the coming months, with a large portion of their holdings consisting of home-loan product. Defunct SIVs formerly run by Axon Financial and Ceres Capital are also poised to be heavy sellers, as they move to auction off $13 billion of assets by yearend. On top of that, banks, insurers, asset managers and other investors are planning opportunistic sales to lock in price increases that occurred following a July 8 announcement by the U.S. Treasury Department that it was moving forward with its Public-Private Investment Partnership. On top of that are early indications of a spurt of new mortgage-backed issues in the pipeline (see article on Page 3). A hint of the coming secondary-market supply was seen this week, when bondholders voted to liquidate Kent Funding 1, a CDO that Declaration Management issued in 2005 at a face value of $1 billion. The investors gained that power after the transact... http://www.abalert.com/headlines.php?hid=63825 J.P. Morgan is no longer interested in underwriting collateralized debt obligations. The bank pulled the plug on its once-active CDO-underwriting division at the end of June, culminating a gradual withdrawal that began in 2007. Employees of the unit were given the option of looking for other positions within the bank or accepting severance packages. Those who chose to leave include vice president David Goldfinger, who had been originating and structuring CDOs since joining J.P. Morgan in 2002. Also rumored to be gone is Vivek Mathew, another vice president with a CDO-structuring focus. Meanwhile, Sean Griffin appears to be staying behind temporarily as the sole member of J.P. Morgan's CDO group - with the mission of unwinding the unit. He has worked at the bank for about eight years. Goldfinger, Mathew and Griffin were among just a handful of personnel left in J.P. Morgan's CDO operation following numerous staff exits amid the credit-market collapse. In October 2007, for example, the bank severed a team brought in just a year earlier to boost its presence as an underwriter of deals backed by structured-product portfolios. Industry players say the broader CDO division's fate began to look especially dim with the October 2008 resignations of Brian Zeitlin and Jim Kane. Zeitlin presided over CDO underwriting as global structured credit product chief, while Kane led North American structured-product distribution. The two now run a New York advisory shop called GreensLedge Group. They had joined J.P. Morgan in... http://www.abalert.com/headlines.php?hid=63845 Secondary-market prices are soaring for bonds that qualify for buyer financing via the Federal Reserve's Term Asset-Backed Securities Loan Facility. The movements set the securities apart from non-eligible paper, whose values have remained unchanged or have even moved in the opposite direction. For example: Three-year senior auto-loan bonds that Honda priced at 250 bp over swaps in a May 5 TALF transaction were changing hands this week at 125 bp over swaps - with much of that differential emerging in recent days. By comparison, triple-A-rated auto-loan bonds with similar maturities but without TALF eligibility were trading this week at 225 bp over swaps, unchanged from the previous week. The reason for the so-called tiering: There has been more demand for recent TALF bonds than issuers could accommodate, forcing investors to seek supply on the secondary market. One buysider noted that in the latest monthly round of TALF issues, which priced on or just before July 7, a $725 million auto-loan deal from AmeriCredit was 17 times oversubscribed. quot;If the oversubscription continues, you'd fundamentally expect that spreads will continue to tightenquot; for TALF-eligible paper, another trader said. Investors are eager to snap up TALF bonds for several reasons. First, the non-recourse nature of the Fed loans acts as an added assurance for bondholders. It also helps that such financing is available, as most other sources of leverage have vanished. And because the underlying collateral is relatively new and desig... http://www.abalert.com/headlines.php?hid=57333 Worldwide securitization activity is set to build ever so slightly in the next six months with continued central-bank support, as annual issuance volume heads toward its lowest point since 2002. Issuers around the world leaned heavily on government-sponsored liquidity programs as they generated $409.1 billion of new asset-backed securities, residential mortgage bonds, commercial MBS and collateralized debt obligations during the first half of this year, according to Asset-Backed Alert's ABS Database. With that support still in place, industry players are looking for a full-year total of roughly $850 billion - meaning they foresee only a modest rebound from the depressed levels of the January-June stretch. The main driver of any such recovery would be the U.S asset-backed bond market, as the flow of European deals holds steady at a slower pace than last year. But no matter what happens, it's a cinch that 2009 volume will fall far short of 2008's $1.4 trillion tally. The last time annual securitization volume registered below $850 billion was 2001, when $768 billion of deals came to market. The industry then entered a period of explosive growth that would see annual supply peak at $2.7 trillion in 2006, only to fall to $2.3 trillion in 2007 as the global credit crisis took hold. The steep drop to the 2008 figure, meanwhile, reflected a lack of late-year deals as credit-market conditions worsened. Even with this year's further reduction, however, market players said they are simply happy to see any sign... http://www.abalert.com/headlines.php?hid=55318 Lloyds Banking is unwinding one of the world's largest portfolios of asset- and mortgage-backed bonds. The holdings, with an estimated face value of $105 billion, represent the combined businesses of a buyside platform that the London bank inherited with its January takeover of HBOS and a smaller program it was already maintaining. The HBOS component, accounting for $80 billion of the total, had been run by Richard Paddle in London. He left the bank last month, and is expected to take a few months off before getting back into the business. Also gone are six members of Paddle's 10-person team, including portfolio managers Jason Walker, Milan Patel and Asha Panigrahi. Paddle was overseeing the portfolio as HBOS' head of credit-product trading. His duties have been taken over by Lloyds' Kate Grant - who was already running more than $25 billion of structured-product investments at the bank. The remaining members of Paddle's group, including portfolio manager Wouter Vanasscher, have been folded into Grant's team. While Lloyds appears to be focusing on HBOS' securitized-product investments for disposal, word is that the bank eventually intends to unload the holdings of Grant's division as well. In both cases, the moves would come as part of an effort by the battered bank to shed risk after receiving substantial cash infusions and other support from the U.K. government. Some of the holdings would be allowed to mature, while others would be sold. But inconducive market conditions could cause the process to... http://www.abalert.com/headlines.php?hid=49338 Wall Street dealers appear to be ending a practice in which they have routinely assigned values to clients' holdings of asset- and mortgage-backed bonds free of charge. Most top underwriters in the business have recently told buysiders that they plan to make such moves or have made hints to that effect, with some of the shops already taking action. The banks say they have little choice, due to fallout from the credit crisis - such as staff and budget reductions, and additional efforts that have become necessary in determining bond values. The complimentary pricing services, usually offered via traders and salesman at major investment banks, have long provided regular buyers of structured products with subsequent mark-to-market valuations of those holdings on a daily, monthly or quarterly basis. The bondholders, in turn, have come to rely on the marks in managing their portfolios. Some banks are now planning to charge fees for broader versions of the services, while others are cutting back on the pricing information they supply to clients. The move away from free support has drawn mixed responses from buysiders. Some investors understand that cash-strapped banks must now charge asset managers for marks, realizing the institutions can't afford to absorb the related infrastructure costs - especially given the fact that volatile market conditions have made such exercises more labor intensive than ever. However, some see it as just another sign that investment banks have abandoned their franchises as market... http://www.abalert.com/headlines.php?hid=47832 The next shoe is dropping on the already-clobbered mortgage-backed securities market, and this time holders of senior bonds are among those in peril. The continued deterioration of home values combined with the widespread expiration of lenders' foreclosure moratoriums are accelerating losses in first-lien mortgage portfolios that secure many MBS issues. Rating-agency analysts are privately warning market players of the new one-two punch, which they contend will cause losses for the top-rated classes of many MBS issues. Subprime-mortgage issues are already hemorrhaging from the latest housing-market conditions, but rating-agency analysts predict the losses will spread over time to bonds backed by alternative-A loans and even mortgages to prime-quality borrowers. quot;For a lot of these, it's just a matter of time,quot; said one rating-agency professional. The agencies are believed to be preparing reports on the ominous trend. It's difficult to tell which issues will suffer losses first given the unpredictability of repayment trends, regional unemployment rates and shrinking home values. But analysts point to several MBS issues whose senior pieces are drifting closer to the danger zone. For instance, losses on the subprime mortgages backing Natixis' Real Estate Capital Trust 2007-HE2 issue have wiped out all but three of the junior tranches protecting senior-bond holders. Losses ate through five of the subordinate tranches in only the past six months. Mortgages securing the issue, which... http://www.abalert.com/headlines.php?hid=47619 Mortgage lenders have started approaching rating agencies with securitization pools that they think might qualify for an expanded version of the Federal Reserve's Term Asset-Backed Securities Loan Facility. The prospective issuers include many of the nation's largest banks, such as Bank of America, Citigroup, J.P. Morgan and Wells Fargo. It's unclear exactly what the institutions want from the rating agencies at this point, however, as the Fed has yet to approve proposals that would make mortgage bonds eligible for TALF financing. That said, investors believe it's possible the issuers are simply trying to get a feel for how the rating agencies would treat mortgage-backed offerings these days. Indeed, it has been nearly a year since anyone securitized new private-label mortgages in the U.S., and much of the criteria for grading such deals has changed in the meantime. quot;They're just trying to get a handle on what may be a triple-A [rating],quot; one buysider said. Mortgage lenders are certainly eager to see Fed-assisted securitization as a funding outlet. With open-market issuance costs currently prohibitive and whole-loan sales in a funk, many of those shops have been left holding inventories of loans that would be suitable for TALF deals. That is, if they were allowed. quot;They've got whole-loan pools they're sitting on and are thinking about securitizing into TALF,quot; the investor said. TALF was created to offer government financing to buyers of certain asset-backed securities, in a bid... http://www.abalert.com/headlines.php?hid=46995 Even as other credit-card lenders rush to sell bonds for use in the Federal Reserve's Term Asset-Backed Securities Loan Facility, Bank of America is worried such a move would leave it with an unwanted stigma. That's because under Fed guidelines, the Charlotte bank would be considered a subprime lender. According to Moody's, only 68.1 of the borrowers behind BofA's securitized credit-card accounts have FICO scores above 660. The Fed, meanwhile, doesn't consider card transactions to be of prime quality unless 70 of their underlying accounts are at or above that threshhold. The upshot is that buyers of any TALF-eligible bonds from BofA would have to adhere to a more stringent down-payment schedule that the Fed applies to financing of subprime-loan securities through the program. Those quot;haircutsquot; aren't onerous on their own, ranging from 6-10 instead of 5-8. But for BofA, the subprime label would represent a scarlet letter of sorts. Indeed, all subprime assets have been toxic since mid-2007, when defaults among mortgages to borrowers with weak credit histories set off the worst financial crisis in a generation. quot;They don't want it out there in bright lights,quot; one investment banker said. At the same time, expectations are mounting that BofA will soon take steps to reduce the volume of low-FICO-score receivables in its securitization pools. Such a move might resemble one made by GE Capital in February, when the company pulled $1.6 billion of low-quality receivables from the collateral for its outstand... http://www.abalert.com/headlines.php?hid=46852 Private-sector demand for U.K. mortgage bonds is about to get a major test, as issuers tap into a new government-guarantee program. A handful of issuers, rumored to include RBS and Lloyds TSB, are preparing to float several billion dollars of bonds backed by prime-quality home loans in the region and insured by the U.K. Treasury. They've already begun contacting investors, with a focus on U.S. money-market funds and corporate-buying programs that can pick up $150 million to $200 million of securities at a time. The deals are expected to price before U.K. financial-market players take their usual summer breaks, beginning in early August. But if the issues are still in the market at that time, it's possible that they'll linger until trading picks back up in September. The offerings would mark the first large wave of U.K. mortgage securitizations to make the rounds with private-sector investors in more than a year, in a shift away from a Bank of England program that has been propping up most deal production by writing repurchase lines against retained securities. But government support will still be at play. That's because the issues would be among the first crafted for a program, enacted April 22, through which U.K. Treasury will guarantee up to amp;163;50 billion ($77.6 billion) of principal and interest on mortgage bonds. Holders of the guaranteed bonds would be able to sell their covered holdings back to the issuers at no loss, with the Treasury making up any shortfall. Qualifying deals must be backed by prime-quality lo... http://www.abalert.com/headlines.php?hid=45743 Structured-product issuers are lining up an estimated $15 billion to $20 billion of deals for the next monthly installment in the Federal Reserve's Term Asset-Backed Securities Loan Facility. The offerings, scheduled to price on or just before June 2, would represent the largest wave of deals to emerge from the program so far - topping the $13.6 billion of issues that came to market during the first week of this month. The issuers in the queue include Capital One, which is contemplating a credit-card securitization in excess of $1 billion. Such an offering would mark a reversal of sorts for the lender, which was thought to be avoiding TALF while funding its receivables through deposits. Other first-time TALF users are likely to include Regions Financial, with an auto-loan issue. Meanwhile, GE Capital has been cited as a repeat issuer after completing a $1 billion sale of TALF-qualified credit-card bonds this month. Its next deal, however, would be backed by floorplan loans to dealers of boats and recreational vehicles. A number of the June offerings are likely to come from companies that were planning to sell TALF-compliant bonds in the program's previous rounds, but didn't follow through for various reasons. They include PHH Vehicle Management, with a deal backed by leases on fleets of cars and trucks, and Fifth Third Bank, with an auto-loan offering. Both of those transactions were initially scheduled for TALF's May round. Toyota was also expected to make an appearance this month with an auto-loan... http://www.abalert.com/headlines.php?hid=45763 As the Federal Reserve's Term Asset-Backed Securities Loan Facility produced its third monthly wave of bond offerings this week, some investors were grumbling that they never got a fair shot at the deals. Instead, the buysiders claimed that underwriters arranged ahead of time to sell certain transactions to just a few large clients. They point to two issues in particular: a $209 million auto-loan securitization from Mitsubishi and a $5 billion credit-card deal from J.P. Morgan. Bookrunner Bank of America placed the Mitsubishi securities with just two investors, while J.P. Morgan's underwriting arm effectively took its already-planned transaction off the table for other buyers after receiving a reverse inquiry from five big clients. There was also talk that BofA, J.P. Morgan and RBS Greenwich Capital carried out a $2.6 billion issue for Sallie Mae in a similar fashion (see Initial Pricings on Page 10). In each case, market players said they initially caught wind of the sought-after deals a few weeks ago only to see them carried out amid an air of secrecy. Many said they never even had a chance to bid on the issues. So who are the buyers Sources point to BlackRock and Pimco as candidates, as they often do when naming big-time holders of asset-backed bonds - and valuable clients of underwriters. Those apparently getting shut out, meanwhile, include a number of hedge fund managers that set up vehicles in recent months specifically to trade TALF-eligible bonds. Some of those firms are run by former bankers. They... http://www.abalert.com/headlines.php?hid=44825 Buysiders are expressing frustration over how dealers handled this week's auction of assets from the failed Whistlejacket Capital structured investment vehicle. About 15 winners emerged on the April 29 bidding deadline, absorbing roughly half of the SIV's $5 billion-plus portfolio. But much of that buying was carried out by a just a few large investment banks that managed the offering process, including Bank of America and Goldman Sachs. Meanwhile, many insurers, asset managers and other traditional investors didn't even bother to participate. The reason: They figured any bids submitted for the most desirable portions of the portfolio would just serve as a reference point for the banks to formulate slightly higher offers of their own. The situation began shaping up more than a month ago, when the dealers sought preliminary bids for Whistlejacket's portfolio - consisting largely of asset-backed securities, mortgage bonds, collateralized debt obligations and corporate debt. At the time, the inquiries looked like an effort to gauge how the sale might unfold. Instead of using the information to ensure a smooth auction, however, investors alleged the banks' intent all along was to come up with prices that would position themselves as sure winners. The apparent plan was to corner any upside on the positions by bidding slightly more for the assets, then holding them until market conditions improve - allowing them to be sold at profits. This isn't the first time such complaints have surfaced. As... http://www.abalert.com/headlines.php?hid=29105 A recent jump in the values of private-label mortgage bonds is looking more like a sustained rally. The prices of such instruments rose on the secondary market this week, as Wall Street institutions including Bank of America, Citigroup and J.P. Morgan snatched up billions of dollars of bid lists. Those purchases signaled a willingness by the banks to make markets and hold inventory for buy-side clients, in turn creating optimism about a continuing improvement in trading conditions. Since the credit crunch began in mid-2007, dealers had become less willing to help out clients who wanted to unload mortgage-bond investments - as the institutions became weighed down by their own inventories. quot;We are just getting back to the way we do business with our clients, which includes providing liquidity when they need it,quot; said James DeMare, who heads securitized-product trading at BofA. quot;Most people you talk to say [non-agency mortgage bonds] are attractive.quot; The banks' renewed market-making interest is largely a result of improving financial health on their own part. They also believe investor interest in mortgage bonds has grown, which cancels out some of the risk that they'll get stuck with investments. Bid lists containing mortgage securities with a face value of at least $2.7 billion found buyers in recent days, with big banks accounting for much of the demand. BofA, for instance, took on a $200 million portfolio of bonds backed by option adjustable-rate mortgages last week. An unidentified... http://www.abalert.com/headlines.php?hid=29119 The third round of funding from the Federal Reserve's Term Asset-Backed Securities Loan Facility is shaping up as the largest yet. As much as $10 billion of securitizations are in the works for the program's May installment, headlined by a $3.6 billion student-loan deal from Sallie Mae. Also in the queue are auto-loan issues of $1 billion from Toyota and $500 million from Honda, along with an auto-lease transaction from PHH Vehicle Management. Among credit-card deals, J.P. Morgan is planning a $1 billion offering and GE Capital is working on an issue of undetermined size. Motorcycle manufacturer Harley-Davidson also intends to be in the market. So do Caterpillar and John Deere, following through on previously discussed plans. Early indications are that the issues will price by May 7, with the Fed doling out TALF loans to buyers on or around May 14. While the deal flow is still a far cry from what was the norm before the credit market tanked, it is robust by recent standards. Just $7.4 billion of TALF-eligible bonds priced in the program's opening round in March, followed by a mere $2.7 billion of offerings in April - representing the lion's share of U.S. asset-backed securities volume in recent months. Those totals came as a disappointment to many industry players, who initially predicted that Round 1 alone would see $20 billion of production. But next month's tally suggests that interest in the program is still increasing. There have also been signs of a broader market recovery. Only about half of... http://www.abalert.com/headlines.php?hid=28945 A push by Sallie Mae to unload a pile of debt-consolidation credits is breathing life into the moribund market for securities backed by student loans. The initiative has already led to one consolidation-loan securitization, a $2.2 billion issue that Sallie priced April 3 via bookrunners Barclays, Deutsche Bank and J.P. Morgan (see Initial Pricings on Page 10). That left the Reston, Va., with some $3.8 billion of consolidation credits that it still wants to shed, possibly through a series of securitizations that could price in the coming weeks. Sallie's securitization plans are driven by a need to find new sources of funding for various assets as it works to unwind a $24.7 billion commercial-paper conduit facility it had been using for nearly two years. quot;Securitization is really the best way and about the only way,quot; said an equity analyst, referring to plans for consolidation loans held by the conduit line. quot;Sallie can finally rip off the Band-Aid and get rid of this stuff.quot; Sallie also plans to funnel loans into the U.S. Department of Education's Straight A-Funding quot;super conduit,quot; which is slated to go live any day now. That entity is expected to fund $40 billion of student loans, but only government-guaranteed credits written from Oct. 1, 2003, through June 30, 2009, are eligible. Consolidation credits don't make the cut - hence the need to find a long-term funding solution for those loans. Once the super conduit is up and running, Sallie intends to stop using its own conduit facility to fund... http://www.abalert.com/headlines.php?hid=28742 President Obama's threat to push Chrysler and General Motors into bankruptcy has all but ruled out the possibility of those companies securitizing auto loans anytime soon, while scaring off secondary-market buyers of their bonds. Investors grew worried that cashflows supporting their bonds backed by Chrysler and GM auto loans would plummet if one or both of the companies reorganized under Chapter 11 of the U.S. Bankruptcy Code. Equity analysts predicted that bankruptcy filings would cause immediate 10-25 declines in the resale values of Chrysler and GM vehicles - and some borrowers would respond by stopping their monthly car-loan or lease payments. Such a scenario would also mean fewer proceeds from sales of repossessed cars - capital that helps support securitizations. Those concerns were reflected this week, as values among auto-loan securities issued by Chrysler Financial and GMAC fell, while other issuer's deals leveled off after rallying in the preceding days. It didn't seem to matter that one of the strongest selling points of asset-backed securities has always been that they are insulated from the risks of bankruptcy. In thin trading, 1-year senior bonds backed by Chrysler Financial loans changed hands this week at spreads yielding 800-900 bp over swaps, 100-200 bp wider than a week earlier. The wider spreads translated into a price of about 89 cents on the dollar for the securities. Two-year GMAC issues, meanwhile, were offered at 800 bp over swaps, which wasn't enough to attract any takers. By... http://www.abalert.com/headlines.php?hid=28658 Seer Capital, the investment shop led by former Deutsche Bank structured-finance executives Phil Weingord and Richard D'Albert, is ready to launch its first hedge fund. The New York firm hopes to get its Seer Capital Master Fund up and running in the coming weeks, using the vehicle to buy distressed asset-backed securities, residential and commercial mortgage bonds and whole loans. The plan is to raise $200 million to $400 million for the entity by tapping funds of funds, pension systems, foundations, endowments, family offices and wealthy individuals for equity contributions. The fund won't use leverage to increase its buying power. Its investment strategy mirrors what Seer has been doing through separate accounts since Weingord started the firm last year. Those accounts now encompass about $200 million of client capital. The decision to start with separate accounts partly reflects a recent preference by investors to have their money in stand-alone portfolios that they can access easily. Many of those players became wary of commingled funds when managers of such vehicles responded to credit-crisis pressures by blocking withdrawals and walling off illiquid holdings in so-called side pockets. They also feared getting stuck with unwanted assets amid heavy redemptions by shareholders more concerned with short-term results. For its work on the new vehicle, Seer will charge typical hedge fund fees equal to 2 of assets and 20 of profits. The firm is manned by a staff of 18 structured-product... http://www.abalert.com/headlines.php?hid=28560 An ever-widening variety of investors are seeking to participate in the Federal Reserve's Term Asset-Backed Securities Loan Facility. Among the latest to emerge as prospective buyers of bonds that qualify for the government-lending program are big Wall Street dealers, including Barclays, Deutsche Bank and J.P. Morgan. At the same time, commercial-paper conduit operators are talking to lawyers about purchasing TALF-eligible securities. In both cases, the investments would entail the creation of special-purpose entities that would hold pools of eligible bonds. For the conduit operators, those vehicles would essentially serve as intermediaries for their own portfolios. But the dealers are pitching theirs to third-party players. Barclays and J.P. Morgan already have such vehicles up and running, although it's unclear whether they were among an estimated 15 buysiders that met the March 19 deadline to apply for an initial round of TALF loans that goes out next week. Deutsche's vehicle is still in the works. All three banks are also signed up to underwrite deals that qualify for TALF, which seeks to bolster demand for triple-A-rated asset-backed securities by offering Fed loans to buyers of such products. That means the institutions would receive two layers of fees: their initial underwriting discounts, plus management charges equal to an estimated 1.5 of their investment vehicles' holdings. Why set up the intermediary vehicles Many investors are eager to obtain TALF loans, but are put off by quot;customer... http://www.abalert.com/headlines.php?hid=28493 DZ Bank is shutting down its U.S. commercial-paper conduit operation, spurring talk that the unit's 21-member staff will soon shift somewhere else. The Frankfurt bank made the call to shutter the New York-based division last week. In the process, it implemented a 3-year unwinding plan for the team's only conduit, the $2.7 billion Autobahn Funding. Sources at DZ said several other institutions have already inquired about picking up the group's employees to start a new conduit operation or join an existing one. The talk is that the individuals could have a new home by the end of September, but they will remain involved with DZ until Autobahn finishes unwinding. DZ's conduit staff is run by Patrick Preece and lieutenants Dan Marino, Sandeep Srinath and Chris Tucker. The reasons for shuttering the operation weren't tied to performance. Rather, the 1,400 constituent banks that make up DZ appear to have decided that the U.S. effort didn't benefit them as Germany-focused institutions. The move came with little warning. Just a month ago, DZ was seeking a deal-surveillance specialist for Autobahn. It has now called off that search. The plan doesn't affect DZ's other securitization businesses, including a conduit division it maintains in Europe. Compared to many other conduits, Autobahn has fared well throughout the credit crunch - actually increasing its outstandings and its funding capacity. The multi-seller vehicle has been able to do so largely because it has avoided mortgages in favor of funding... http://www.abalert.com/headlines.php?hid=28355 Deteriorating borrower performance has forced American Express, Citigroup and First National Bank of Omaha to divert cashflows from securitized credit cards into special reserve accounts - and more drastic moves could follow. The so-called cash trapping was triggered by a slide in excess spreads, the money remaining in securitization pools after bondholders have been paid. Under normal circumstances, those funds would be the issuers' to keep. But if excess spreads fall to minimums established in bond covenants, those cashflows must be set aside to create cushions against investor losses. Typically, those quot;triggersquot; are 4-5. Amex trapped $1.5 million for two series of fixed-rate bonds in February, after the deals' excess spreads fell below a 5 threshold. Unless those spreads rebound, the lender must increase the reserve to $22 million. Citi started trapping cash on deals from its Citibank Credit Card Issuance Trust in January, when excess spreads dipped below a 4.5 minimum. Some deals from an older Citi trust were already trapping cash last year. First National Bank of Omaha, meanwhile, started trapping last month, when spreads on its First National Master Note Trust dipped to 3.8. The maneuvers mirror those taken by several other credit-card lenders in recent months, as weakening consumer credit has sent ripples through securitization trusts. Ultimately, the issuers will want to restore their excess spreads, so they can resume pocketing the left-over cashflows. To achieve that goal, Amex and Citi may follow the... http://www.abalert.com/headlines.php?hid=28371 ---------- CORRECTION: A Feb. 27 article, quot;Rating Downgrades Swamp Alt-A Bonds,quot; mischaracterized the volume of alternative-A mortgage bonds held by State Street Global Advisors. The firm owns $234 million of such securities, accounting for just a small slice of its $535 billion of assets. ---------- The values of securities backed by alternative-A mortgages took another dive this week, after a raft of senior bonds were downgraded to junk status. Moody's has revised grades since last Friday on billions of dollars of securities collateralized by alt-A credits, lowering many from triple-A to below-investment-grade in one fell swoop. The underlying private-label mortgages, which have performed below expectations, were originally written for prime-quality borrowers but received the alt-A designation because they didn't meet loan-underwriting standards set by Fannie Mae and Freddie Mac. Overall prices for alt-A bonds are likely to keep declining over the next six months, as Moody's continues downgrading such deals. The agency expects their collateral-default rates to peak around the fourth quarter. Alt-A bond prices have been declining since last year amid financial-market turmoil and weakening housing prices. This week's downgrades accelerated that trend, as buysiders anticipated a flood of secondary-market offerings from large institutions that can't - or just won't - hold junk-rated bonds. Market... http://www.abalert.com/headlines.php?hid=28104 Credit-card lenders are hopping on the covered-bond bandwagon. Capital One, Citigroup and Discover are among several U.S. credit-card shops mulling such deals, as they seek alternatives to funding themselves in the downtrodden asset-backed bond market. Underwriter RBS Greenwich is also in on the act, as it works with a number of card companies to set up issuing platforms. Elizabeth Padova Hanson, who heads RBS' covered-bond unit and sits on SIFMA's covered-bond council, is spearheading the bank's efforts. Covered bonds, which combine aspects of asset-backed securities and corporate debt, have drawn considerable attention since early 2008 as a potential way for U.S. mortgage lenders to fund themselves in the face of anemic demand for traditional securitizations. But the on-balance-sheet deals haven't been seen as a possibility outside the home-loan sector until now. The motivations of credit-card lenders are largely the same as those of mortgage companies. That is, the yields they must pay to asset-backed bond buyers have often swollen to uneconomical levels amid the credit crisis, effectively erasing a once-dependable source of funding. Even after tightening by several hundred basis points, for instance, 2-year senior card bonds are trading around 300 bp over Libor - compared to flat to Libor before the debt market bombed in 2007. Covered bonds, meanwhile, promise to offer lower funding costs in part by appealing to a broader investment community that favors more conservative... http://www.abalert.com/headlines.php?hid=28006 Many securitization professionals came away from this week's big industry gathering in Las Vegas feeling conflicted and increasingly nervous about the U.S. government's expanding role in the market. On the one hand, most of the 4,200 structured-finance pros who registered for the American Securitization Forum event were eager to hear from and question the hundreds of federal officials and regulators who turned up in Las Vegas. Market players arrived at the trade group's conference with their hands out, hungry for details about how the government will use mountains of taxpayer money to inject badly needed liquidity into the stalled credit market. On the other hand, many securitization specialists confessed to nagging fears that the battered industry is ceding too much control in its hour of desperation. Long after the economy pulls out of its slump, the once-booming securitization business is likely to be far more modest - and far more heavily regulated - than it was in its heyday. quot;I've never seen so many regulatory guys in one place before,quot; one investment banker said. quot;They're everywhere. They make me nervous.quot; Several years from now, quot;There's going to be a massive effort to extractquot; the government from securitization, SIFMA president T. Timothy Ryan said. Industry players have to take their medicine with a smile for the time being, however, because only the federal government appears to have the wherewithal - and the inclination - to jump-start the frozen market. At least 10 regulatory... http://www.abalert.com/headlines.php?hid=27873 Some demand is emerging for professionals who can sell or trade structured products, defying an otherwise bleak employment outlook for 2009. Continuing a trend that has been in place since mid-2007, the overall job market for securitization specialists is expected to contract in the months ahead. But there is hiring taking place at broker/dealers, both on the part of established players and new shops. Those firms, which act as middlemen for investors who want to buy or sell various securities, need the extra hands as ongoing market fluctuations prompt clients to move around bonds backed by mortgages and other consumer assets. Investment firm Aladdin Capital, which is working to revive a dormant broker/dealer arm, got into the hiring act this week by bringing in two seasoned market players: John Carroll and David Attisani. Carroll's former employers include Barclays, where he headed asset-backed securities trading until a year ago. He now oversees securitized products for the Aladdin team. Attisani, who has covered sales of asset- and mortgage-backed bonds as a vice president at Countrywide, is helping to run sales and marketing. Amherst Securities, Guggenheim Capital, Jefferies amp; Co., Mesirow Financial and MF Global have also hired structured-product marketing specialists and/or traders in the past few weeks. Mesirow wants to bring in as many as 10 more residential and commercial mortgage bond traders and marketers by yearend. Recruiters also say bigger broker/dealers, including Morgan Keegan, Sandler... http://www.abalert.com/headlines.php?hid=27888 The almost 4,000 securitization professionals headed to next month's industry gathering in Las Vegas are desperate to revive their decimated corner of the financial market. So forget the extravagant parties of years past. Always an optimistic lot, most structured-finance pros expect private-label securitizations and related financing techniques to outlast the current slump. But it's becoming increasingly apparent that ensuring the market's survival will take a lot more work than anyone might have expected. That, in turn, makes those planning to attend the American Securitization Forum conference eager to press each other for ways to re-ignite issuance and trading. The trade group's four-day confab kicks off Feb. 8 at the Venetian Hotel. More than 3,500 market players were registered to attend as of this week, including 1,100-plus investors and just under 600 issuers. More signups are expected over the next week. But overall attendance at quot;ASF 2009quot; won't come close to last year's event, for which some 6,000 registered, because of massive layoffs across the industry and other fallout from the credit crisis. With asset- and mortgage-backed issuance at a virtual standstill and bonds trading sporadically at steep discounts on the secondary market, industry insiders feel an urgent need to use the sixth annual ASF summit as a forum for figuring out how securitizations will fit into a post-credit-crunch universe. quot;The securitization world is much different today than at any other time in its... http://www.abalert.com/headlines.php?hid=27633 Market insiders are predicting that the Federal Reserve's Term Asset-Backed Securities Loan Facility will spark up to $20 billion of new structured-finance offerings in its first month. The expectations indicate that industry players are developing a clearer picture of how the $200 billion TALF program will stimulate the now-frozen securitization business after it kicks in next month. At that point, the Fed will begin allowing investors in triple-A-rated bonds backed by auto loans, credit-card receivables, student loans and small-business credits to post those holdings as collateral for low-cost government loans. At least one issuer, auto lender World Omni, is already shopping an asset-backed bond offering that would appear to qualify for such exchanges. The $500 million deal is secured mostly by loans on Toyota cars sold by the automotive-dealership arm of World Omni's parent, JM Family Enterprises. While World Omni hasn't explicitly promoted the issue as TALF-eligible, market players certainly see it that way - in part because the underlying assets are of a particularly high credit quality. The transaction also fits in with expectations that auto lenders, especially cash-starved Chrysler, GMAC, and Ford, will be the first to take advantage of TALF. Credit-card lenders would soon follow, with industry insiders identifying Bank of America, J.P. Morgan and Citigroup as candidates. However, opinions differ on exactly how much deal flow TALF will create. The securitization co-heads at one investm... http://www.abalert.com/headlines.php?hid=27756 ---------- CORRECTION: A Jan. 16 article, quot;Spread Tightening Seen as Short-Lived Trend,quot; incorrectly stated that Ford had received support from the U.S. Treasury Department's Troubled Asset Relief Program (TARP). The automaker hasn't accepted government bailout money. ---------- Don't expect the values of asset-backed securities to continue rallying at the torrid pace seen last week. Industry insiders anticipate that now-tightening spreads on those issues will level off in the U.S. within the next two weeks or so, as investors retreat from a brief surge in trading activity that boosted values by up to 250bp. The upshot is that overall values will remain far below pre-credit-crunch levels for the foreseeable future. Some buysiders need the breather so they can gauge the impact of the federal government's latest efforts to prop up credit-market liquidity. They are also anxious to see whether an annual wave of corporate earnings reports indicates where the recession is headed. J.P. Morgan was the first major bank to release earnings this week, boosting its tally of writedowns on mortgage-related products to $13.3 billion since the credit market collapsed in mid-2007. In announcing the results, chief executive Jamie Dimon predicted that the battered economy would get worse before it gets better. The U.S. Treasury Department also moved this week to deploy the remaining $350 billion in its Troubled Asset Relief Program (TARP). The $700... http://www.abalert.com/headlines.php?hid=27349 Securitization volume is likely to rebound moderately this year in the U.S. and decline in Europe, as both markets struggle to pull out of a prolonged funk. Even that's just a guess ventured by less than 20 industry insiders who are willing to predict whether the battered structured-finance market will start recovering from a worldwide credit crunch that took hold in mid-2007. In a display of widespread uncertainty, most other securitization professionals feel that projecting what will happen over the next 12 months is a crapshoot at best. In the U.S., a field of 10 market players who responded to a survey by Asset-Backed Alert have predicted, on average, that issuers will sell $218 billion of public and Rule 144-A asset-backed securities in 2009. That translates into a 44 increase from the 2008 issuance total of $151 billion, which was down by $447 billion, or 75, from the year before, according to the newsletter's ABS Database. In Europe, eight forecasters have called for structured-finance issuance to plunge by 45 this year, to the equivalent of $564 billion. Among other things, they figure the European Central Bank and Bank of England will eventually pull back after propping up the market for more than a year. Their projections include bonds sold to investors and those funneled into funding agreements with the central banks. Like their U.S. counterparts, issuers in Europe are still finding it extremely difficult to line up buyers for their paper. Only $178 billion of the region's offerings... http://www.abalert.com/headlines.php?hid=27364 Banks may soon lose access to leftover cashflows that they typically pocket from their credit-card securitizations. The cause: an ongoing deterioration in the performance of credit-card pools. As defaults continue to mount amid weakening economic conditions, many trusts are nearing the point at which they must quot;trapquot; incoming payments - that is, create special reserve accounts with capital that remains after bondholders receive routine installments. Under normal circumstances, that money, or excess spread, would flow to the issuer throughout the deal's life as profits. But these are hardly normal times. Cash-trapping mechanisms are designed to protect investors in credit-card securitizations from losses in the event that poor asset performance causes their holdings to unwind ahead of schedule. They usually kick in, on a graduated scale, when a pool's excess spread dips below a pre-determined level of 4-4.5 for three consecutive months. As of the end of October, the average trust was barely above that point, at 4.51 according to Samp;P. That followed a dramatic drop brought on largely by rising defaults in the preceding months, from levels that usually ran above 7. It isn't clear which banks might be forced to trap cashflows, but most large-scale issuers of credit-card bonds are in the danger zone. Bank of America operates trusts whose excess spreads are below 4.5, according to Fitch. J.P. Morgan oversees some pools with spreads below 5. What's more, widespread expectations are that excess spreads will... http://www.abalert.com/headlines.php?hid=26612 Structured-product investors remain skeptical about government efforts to bail out Chrysler, General Motors and possibly Ford. Even after the U.S. House of Representatives passed a $14 billion rescue plan for Chrysler and GM Wednesday, bonds backed by their car loans - and Ford's - were trading at massive yields. The message: failures are still likely, even if the rescue measure ultimately clears the Senate and is signed into law. The sentiment is evident in an increasing differential between the yields investors are demanding on bonds backed by loans from the Big Three automakers and offerings from their healthier competitors in Japan. For example, triple-A-rated 1.8-year securities issued earlier this year by Ford and GM affiliate GMAC have been making the rounds on the secondary market at prices of just above 80 cents on the dollar, a trader said. That translates into spreads as wide as 1,400 bp over Eurodollar futures. By contrast, Honda fetched spreads of 350 bp over Libor for the 1.7-year senior piece of a $297 million transaction it priced via bookrunner J.P. Morgan on Dec. 8 (see Initial Pricings on Page 10). Similar bonds have been trading just above 500 bp over Libor on the secondary market. Even a few weeks ago, there was a far smaller gap between returns on bonds from the two categories of automakers - with the growing disparity driven by falling values among issues from U.S. players. Single-A and triple-B subordinate securities from the Big Three have lost 10-15 cents on the dollar... http://www.abalert.com/headlines.php?hid=26597 Don't look for a stream of new securitizations to follow a $466 million auto-loan transaction that Nissan completed this week. Contradicting earlier talks that a successful offering from a well-regarded player like Nissan might unclog a U.S. issuance pipeline that has been frozen since the beginning of October, the word now is that few additional deals are likely to price by yearend. In fact, the only other securitization that might be in the market is a $700 million auto-loan offering that Barclays has been shopping on behalf of Volkswagen - and the general sentiment is that wide-ranging pressures will keep new-issue production glacially slow into 2009. Even before issuance shut down with the start of the fourth quarter, once-hefty issuers like American Express, Bank of America, Citigroup and J.P. Morgan were keeping their distance from the market. And many other big-time players, including Capital One and Sallie Mae, have signaled that they won't be back anytime soon (see listing beginning on Page 10). quot;I think it's just going to be spotty,quot; said an analyst at an investment bank. Still, he noted that there is a backlog of supply that will eventually prompt more issuers to test the market. quot;There's not a single consumer-finance company that could not [benefit from using] securitization right now to fund themselves.quot; There are some reasons to be optimistic. Nissan's deal, Nissan Auto Receivables Owner Trust, 2008-C, created considerable buzz as it was boosted by $100 million shortly before pricing ... http://www.abalert.com/headlines.php?hid=26581 ---------- CORRECTION: A Nov. 21 article, quot;Citi, Morgan Stanley Speeding Up Retreat,quot; contained errors. The item overstated layoffs within John Wood's analytics group, which was reduced to 19 people from 27. In the mortgage-finance division, Jon Riber remains at Citi, contrary to what was stated in the piece. Matt Fallon's name was also misspelled. The article misstated the roles of mortgage-finance head Susan Mills and securitization chief Ted Yarbrough. Overall, Citi says it employs about half as many securitization staffers as it had on board a year ago. ---------- Citigroup laid off a wide swath of its structured-finance team on Wednesday morning, as Morgan Stanley also pruned its staff. Citi's cuts removed a large chunk of its analytics, mortgage-finance and CDO-underwriting units, signaling that the once-mighty investment bank is further reducing its already diminished involvement in the securitization business. Likewise, Morgan Stanley appears to be implementing a plan that would essentially gut its asset-backed bond team in New York. Citi carried out its dismissals as part of an effort to reduce its overall headcount by 50,000, adding to a string of layoffs that have already taken place at the bank since the credit crunch began. Word has it that more layoffs are coming. The securitization-analytics group was perhaps the hardest hit this time around, with just group head John Wood and two analysts remaining from what was a... http://www.abalert.com/headlines.php?hid=26564 Securitization professionals are getting worried that the inauguration of President Barack Obama in January will usher in an onslaught of regulatory constraints that they've been able to beat back in the past. The start of the Obama Administration, coupled with larger Democratic majorities in both the House and Senate, will likely lead to a revival of proposals that could make it more difficult, expensive or risky to issue and buy structured-finance products. Indeed, overhauling the U.S. financial system quot;is one of the first missions of the new Congress,quot; Sen. Charles Schumer (D-N.Y.), said Monday in an address at a SIFMA conference at the Marriott Marquis hotel in New York. Schumer is a member of the Senate Banking Committee. The prospect of a radical new regulatory regime has especially riled the market for private-label mortgage-backed securities, contributing to a recent lack of liquidity and plummeting bond values. quot;The markets are very skittish, and I think rightfully so, about that transition,quot; said Greg Peters, head of U.S. credit strategy at Morgan Stanley. He spoke during a panel discussion at the SIFMA conference, which focused on the U.S. Treasury Department's financial-system bailout. Securitization professionals are particularly concerned that the idea of applying quot;assignee liabilityquot; to MBS issues will get a new lease on life, even though they previously succeeded in pushing back that threat several times over the years. Such a measure would permit mortgage borrowers who feel... http://www.abalert.com/headlines.php?hid=26549 A consensus is developing that many banks have understated how badly they'll be hurt by defaults among holdings of unsecuritized mortgages. Even as they have taken tremendous writedowns on portfolios of home-loan bonds since the housing market fell apart last year, some large and mid-size financial institutions are still booking their whole-loan investments at par or close to it. And that means they'll wind up with even bigger losses if predictions of heavy defaults among those credits prove correct. Sources named Citigroup as one company that may be holding mortgages at values that don't fully take expected default rates into account. And that's after it logged $46.8 billion of debt-product writedowns since mid-2007. Another candidate is Wells Fargo, which has avoided major loan-loss provisions so far. The company will take some loan-related adjustments for assets it expects to take on with its purchase of Wachovia, however. Financial institutions have to mark down loan portfolios inherited through purchases of other lenders, even while often leaving their own mortgage books untouched. That said, many specialty mortgage lenders have bumped up loan-loss provisions on their own. So has Wachovia, while taking $8.8 billion of credit-crisis markdowns. Privately held regional banks could also take big hits. Hints of what might be in store for home-loan portfolios can be seen among bonds backed by similar debt pools. In that area, 802 classes of securities experienced defaults during the third quarter of 2008, up from 635... http://www.abalert.com/headlines.php?hid=26533 Barclays and RBS Greenwich have shifted the leadership of their CDO-underwriting teams, while UBS cuts back its staff. At Credit Suisse, meanwhile, U.S. CDO-banking head Steve Hilfer was gone as of today. The changes at all four banks add to what has been the most tumultuous year ever for CDO professionals, as the sector gets kicked around amid the worldwide credit crunch (see listing on Page 6.) Barclays appointed Jason Schechter as head of its CDO group this week, handing the former Lehman Brothers staffer a role most recently played by Kristofer Kraus. RBS assigned Adam Siegel as its top CDO banker in Greenwich, Conn., and Darron Weinstein as his London counterpart, giving them responsibilities last held by Vincent Dahinden. It also installed Matt Katke as co-head of CDO trading in Greenwich. Under Schechter, Barclays' CDO unit is concentrating on secondary-market trading - a focus brought on by a drought of new-issue activity. He arrived at the bank via its agreement last month to buy parts of the bankrupt Lehman, where he headed CDO trading. Kraus was leaving around the same time. Schechter now reports to former Lehman colleague Eric Felder, who last week took over as Barclays' head of credit-product trading. Lehman had named Felder as co-head of its fixed-income division and awarded him a $41 million retention package in September, just days before filing for bankruptcy protection. Barclays' appointments come with the bank nearing the end of a staffing shuffle triggered by its purchase of Lehman.... http://www.abalert.com/headlines.php?hid=26517 Rising defaults among private-label credit-card accounts are prompting some lenders to think about unwinding securitizations backed by those assets. Companies rumored to be mulling such moves include clothing retailer Charming Shoppes and Sterling Jewelers, the operator of the Kay Jewelers and Jared chains. At issue is a jump in the number of accounts that retailers are deeming uncollectable. According to Fitch, securitized pools of private-label credit cards saw their charge-off rates climb to nearly 9.4 last month, from 8 in March and 6.4 last September. In some cases, those losses are large enough to make it uneconomical for lenders to continue operating trusts that were used to securitize the cashflows. Now the preferred strategy among those shops appears to be to liquidate the underlying receivables, including defaulted accounts, and use the proceeds to repay bondholders. quot;There is a lot of stress building around the edge of the private-label sector,quot; said one buyer of charged-off portfolios. Some bondholders also favor trust liquidations in cases where issuers can no longer turn profits through their securitization programs. It's possible they fear that losses will only rise going forward, threatening the principal they are owed. quot;The money that is coming in from these trusts isn't enough to pay the service providers, like the lawyers and trustees that maintain it, and give bondholders their cut too. Liquidating is becoming the best option,quot; the charge-off buyer said. The liquidations might... http://www.abalert.com/headlines.php?hid=26505 The asset-backed commercial paper market showed signs of recovery this week, as sweeping government efforts to bolster financial markets made investors more comfortable with longer-term conduit issues. It also helped that Lehman Brothers' credit-default swap obligations were settled via an Oct. 10 auction, ending a situation that had many institutions with exposure to the bank dumping investments in favor of hard cash. The confluence of factors caused yields on 30-day conduit paper to fall below 4.4 this week, after spiking to a record 5 on Oct. 13 - offering solid evidence that investors who shunned the market in recent weeks are now trickling back. The uptick in demand is also creating some hope for the battered term-securitization business, as the conventional wisdom is that short-term markets are first to recover from liquidity crunches. Industry insiders also think the term market will improve as the federal government's Troubled Asset Relief Program (TARP) kicks into gear. However, the consensus is that a further rebound on the commercial-paper side will be necessary before longer-term asset- and mortgage-backed issues follow suit. For now, the market for term deals remains in a funk. Trading this week was light to nonexistent, as prices weakened or hovered near record lows. Still, the developments for commercial-paper players are encouraging. quot;It seems that there's some thawing,quot; said Debbie Cunningham, who oversees taxable money-market funds at Federated Investors, a $333 billion firm in Pittsburgh.... http://www.abalert.com/headlines.php?hid=4696 Industry players are increasingly singling out Bank of America, Citigroup, J.P. Morgan and Wells Fargo as candidates to benefit from the U.S. Treasury Department's Troubled Asset Relief Program. The banks might not be seeking to shed their own toxic mortgage investments, however. Instead, the thought is the institutions will use the $700 billion bailout package to disinfect the balance sheets of other operations they are purchasing - by forcing the acquirees to tap the rescue program under their own platforms. In BofA's case, that would mean sending the government billions of dollars of mortgage-related investments from Merrill Lynch. J.P. Morgan would be seeking to unload unwanted mortgage holdings from Washington Mutual. And Citi or Wells Fargo - or maybe both - might be dumping similar assets from Wachovia. By moving the damaged assets away from banks they plan to buy, as opposed to working from their own books, the institutions would be pulling off a coup of sorts: benefitting from the financial-system rescue without enduring the government scrutiny that comes with it. For instance, BofA, Citi, J.P. Morgan and Wells Fargo might not be subject to bailout-specific executive-compensation limits or corporate-governance intervention under that scenario. Such restrictions have been seen as some of the biggest hindrances to use of the package, set up last week under the Emergency Economic Stabilization Act. Likewise, banks accepting bailout money could have to fork over debt or equity to the government, and... http://www.abalert.com/headlines.php?hid=4560 A shift in the competitive landscape for underwriters of asset- and mortgage-backed securities has accelerated in the past three months, as investment banks increasingly concentrate on managing deals for affiliates. While last year's credit-market collapse had already shaken up the league tables for structured-product bookrunners in late 2007 and early 2008, it was widely thought at midyear that the market's biggest players would get back to business as usual over the long run. Not any more, as already-scarce underwriting assignments from independent issuers have continued to dwindle and fewer banks chase that work. Total U.S. issuance of asset-backed bonds this year has plunged to $135.8 billion, from $524.3 billion, according to Asset-Backed Alert's ABS Database. It takes some digging to see how the developments are affecting market share. J.P. Morgan is heading into the fourth quarter as the most active underwriter of asset-backed securities in the U.S., with $27.1 billion of such deals for a 20 share. It was also in first place a year ago, but with a 10.2 piece of the market. Strip away deals from affiliates - mainly credit-card bonds issued by J.P. Morgan's Chase division - and this year's lead looks a lot less commanding. Under that scenario, J.P. Morgan is also in first place, but with a mere $12.3 billion of deals. That's only 45 of the bank's overall underwriting volume in the U.S. At this point in 2007, the institution derived 52 of its business from third-party issue... http://www.abalert.com/headlines.php?hid=4429 The field of companies pursuing work associated with the federal government's $700 billion plan to cleanse financial institutions of devalued mortgage assets is growing rapidly. Among the players positioning themselves to win assignments is Pentalpha, a Greenwich, Conn., firm that specializes in analyzing and managing pools of troubled home loans. It joins a host of bigger shops that were already jockeying for assignments to guide the government on purchases and management of debt - including BlackRock, BlackStone, J.P. Morgan, Morgan Stanley and Pimco. Meanwhile, law firms Katten Muchin and McKee Nelson are laying the groundwork to serve as advisors to the managers the government ultimately hires. For example, Katten set up a task force this week that would aid those shops in figuring out what to do with the distressed assets they end up overseeing. The group is led by Hays Ellisen and Eric Adams, both of whom are partners in the firm's securitization practice. Even more companies are planning to throw their hats in the ring in the coming days. The early interest in finding ways to profit from the planned financial-system bailout contrasts with uncertainty that surrounds how the process would work. For instance, it still isn't clear which assignments would be up for grabs, exactly what they would entail, or how to apply. What's more, the nature of any government contracts could be swayed by developments in the plan, which represents the boldest attempt so far by U.S. Treasury... http://www.abalert.com/headlines.php?hid=4305 Already-swollen spreads on structured-finance products ballooned even further this week, as the worst financial crisis in a generation grew even deeper. Trading of asset- and mortgage-backed securities became petrified as investors withdrew from the market en masse, forcing sellers to pump up offered yields as they competed for the attention of the few buyers bold enough to remain active. Asset-backed commercial paper offered no safe haven, as funding costs in that sector shot through the roof due to fears that the credit market still hasn't seen its darkest period. quot;Everything is wider, and it's wider offered without a bid,quot; said David Castillo, who heads trading of fixed-income products at broker-dealer Further Lane Securities in San Francisco. quot;We're in the middle of history.quot; The catalysts in the structured-finance shakeup were the same as those roiling the broader financial market this week: the bankruptcy of Lehman Brothers, the forced acquisition of Merrill Lynch and a government bailout of AIG. The stunning developments came just a week after the government's seizure of Fannie Mae and Freddie Mac. The firestorm showed no signs if letting up late in the week either, as Morgan Stanley weighed options for additional backing and questions persisted about the fates of Goldman Sachs and Washington Mutual. A report by CNBC on Thursday that Treasury Secretary Henry Paulson is working on a plan to set up an entity that would buy troubled debt from financial institutions could counteract some of the effects. But... http://www.abalert.com/headlines.php?hid=4201 Bank of America, Citigroup, J.P. Morgan and Wells Fargo have teamed up to draft a blueprint for covered-bond issues in the U.S., an uncommon move for institutions that are usually engaged in heated competition. The formation of the banks' joint effort comes about two months after they separately said they would aid in a government push to create a market for covered bonds in the States - a move aimed at helping to open a new funding source for the battered home-loan industry. As part of the initiative, the institutions are working together to create standardized documentation for covered-bond offerings, which combine characteristics of mortgage-backed securities and corporate debt. Part of the goal is to make it easier for investors to analyze the on-balance-sheet transactions, thus making them more appealing to a broader audience and streamlining the offering process. Doing so would help allay one of the primary concerns for the emerging covered-bond market in the U.S.: that the deals would only appeal to a small group of sophisticated investors that have expressed interest so far, including BlackRock, Pimco and TIAA-CREF. Unless broader demand emerges, those buyers would likely insist on generous yields to take on the bonds, which runs counter to the reasoning behind efforts to establish a market. One industry player said issuers would only enter the market if yields on such instruments were below 6, which is less than prevailing levels for many types of traditional mortgage-backed issues these... http://www.abalert.com/headlines.php?hid=4083 Signs of life are returning to one corner of the frozen asset-backed commercial paper market. In recent weeks, spreads on the shortest-dated paper issued by bank-sponsored conduits in the U.S. have tightened substantially. The reason: money-market funds that fled from the sector following last year's credit-industry collapse are reemerging as buyers, discontent with miniscule yields on safer U.S. Treasury bonds. The improvements have been most pronounced for conduits run by banks that investors perceive as mid-tier, such as Calyon and HSBC. In that category, spreads have narrowed by 5-15 bp in the past month-and-a-half. For example, HSBC's Solitaire Funding conduit sold a batch of one-month paper to U.S. investors this week at 3 bp over Libor. In late July, similar issues from Solitaire were going for spreads quot;in the teens,quot; one banker said. Spreads have also tightened for conduits run by top-tier banks like Bank of America, Barclays, Deutsche Bank and J.P. Morgan, especially for multi-seller vehicles. But because those issues were already going for just slightly above Libor, they haven't had as much room to narrow. quot;Certainly pricing has improved,quot; another banker said. Most of the tightening has occurred for paper with maturities of up to 30 days. In part, investor willingness to take on those products lately has been tied to a perception that the worst of the credit crisis is over, and the optimism has been shared by unsecured CP buyers. But buyers are still wary of credit-market shakiness,... http://www.abalert.com/headlines.php?hid=3954 More layoffs are taking place at Radian Asset Assurance, as parent Radian Group diverts funds from the bond insurer to its ailing mortgage-insurance affiliate. Radian notified about 50 employees in New York and London over the last six weeks that their last day will be Sept. 5. It's unclear how many of the dismissals involve the guarantor's structured-finance division, which had already seen its headcount slashed to about 10 individuals, from almost 40, since March. Radian officials said this week that the upcoming layoffs are part of an already-in-progress effort to prune bond-insurance staff in response to a decline in new business, especially in the CDO sector. But at the same time, plans are in place to move $100 million from the bond insurer to the operation's mortgage-insurance affiliate, which desperately needs the capital after getting swamped with claims on defaulted home loans over the past year-and-a-half. The moves are intertwined to some extent. Part of Radian's reduction in new bond-insurance volume results from an overall decline in the amount of fresh debt-product offerings hitting the market. Its lighter workload also helps accommodate the planned capital shift, by leaving it with a surplus of reserve funds. Also driving down activity on the bond-insurance side, and thus helping to free up capital, is the fact that Moody's and Samp;P made it far more difficult for Radian to sell new wraps when they downgraded its bond-guarantee business in June to A3/A (from Aa3/AA). In doing so, the... http://www.abalert.com/headlines.php?hid=3835 The market for asset-backed bond issues just got a little worse. Extending a decline that began a month ago, the values of newly offered securitizations plunged this week - to the point where issuers and underwriters have essentially given up on negotiating pricing with investors. Instead, most sell-side players are now willing to float deals only if they've lined up buyers in advance. quot;All that matters now is liquidity,quot; one trader said. The cause of this week's rout: an onslaught of bad financial-market news that shows lenders and consumers are still feeling the pinch of the credit crunch and broader economic woes. Troubles at Citigroup and the Big Three automakers had an especially strong impact. Anticipation of painful midyear earnings reports had already caused the values of new asset-backed bonds to fall in recent weeks, nearly erasing gains that took place in May and June. Now that many of those results have come in even weaker than expected, prices are headed toward new lows. What's more, most issuers and underwriters are reluctant to venture guesses about when the decline will end. And because many of them are unable, or unwilling, to cough up the necessary yields to complete deals in today's market, the flow of new issues has dried up - beyond the slowdown that usually takes place this time of year. About $2 billion of fresh supply was making the rounds this week, down from about $3.5 billion a week ago. Meanwhile, any hopes that unfavorable pricings might be isolated to a few recent deals was... http://www.abalert.com/headlines.php?hid=3707 It looks like AgriBank isn't done marking down the values of mortgage-related securities it holds. Structured-product buyers expect the St. Paul, Minn., lender to devalue those investments by $100 million or so by yearend, on top of $136.6 million of unrealized losses it has taken on them since the home-loan industry imploded a year ago. Some of the additional losses may be disclosed in the operation's second-quarter financial report, which could be issued at any time. AgriBank began accumulating the investments nearly 10 years ago, as part of a $7.5 billion portfolio it holds for emergency-liquidation needs it might encounter as the largest of five banks within the U.S. Farm Credit System. The operation acts as a wholesale lender for borrower-owned institutions in 15 Midwestern states, which in turn extend loans to agricultural, livestock and seafood businesses, as well as electrical and telephone-system cooperatives. AgriBank operates under the supervision of the U.S. Farm Credit Administration. Its holdings of mortgage-related bonds mainly encompass home-equity loan and subprime-mortgage securities that originally had triple-A ratings - instruments it chose because they were highly liquid. Clearly, the bonds aren't so liquid these days. They totaled $854 million as of March 31, following a $77.5 million writedown for the preceding three months. The portfolio weighed in around $1.1 billion when it began showing signs of stress in mid-2007. At the time, AgriBank said it had evaluated the... http://www.abalert.com/headlines.php?hid=3577 The secondary market for mortgage-related bonds found itself on shaky ground again this week, as some banks demanded repayment of margin loans they supply to opportunistic buysiders. The main culprit in the leverage pullback is a growing perception that bets by certain bargain-hunting fund managers that home-loan bonds had hit bottom in March, April and May came too early- exposing them to potentially heavy losses as the market slumped instead. Now, as margin calls force some of those buyers to sell their mortgage-bonds investments, a consensus is forming that the values of those holdings will keep dropping from already historic lows. That, in turn, is threatening to create even more losses while dashing earlier hopes for a market recovery in the second half of this year. quot;It's going to get worse,quot; said Jeffrey Gundlach, who runs the $1.6 billion TCW Special Mortgage Credits Fund, a TCW vehicle that aims to buy troubled home-loan securities. A similar fund run by Fortress Investment played a big role in this week's downturn, with the firm acknowledging that the entity, Fortress Mortgage Opportunity Fund, lost 30 of its value since launching in April. Word is that the decline, driven by wrong-way bets that the values of mortgage bonds would rise, prompted several margin lenders to demand repayment. An other opportunistic fund was also on unsteady footing after seeing the values of some distressed mortgage instruments it bought fall from 15 cents on the dollar to just two cents. By... http://www.abalert.com/headlines.php?hid=3446 Another bout of agony is looming for the mortgage industry. Evidence is solidifying that about a year from now, a huge swath of so-called option adjustable-rate mortgages will default, wiping out many investors who hold bonds backed by the credits and dealing yet another setback to the already decimated home-loan industry. Option ARMs, which allow borrowers two or three years of monthly payments that fall short of the interest and principal due, could in fact experience losses that are far more severe than those already seen on floating-rate subprime mortgages and home-equity loans. Option ARMs have actually been performing poorly for months, as over-leveraged borrowers increasingly find it impossible to keep up on their payments. But the troubles experienced so far are likely to pale in comparison to what's ahead - something many market players didn't see coming. Of particular concern are loans written in 2006, when production of option ARMs was at its height and underwriting standards were at their loosest. Countrywide, the failed IndyMac and Washington Mutual were particularly active in writing and securitizing the credits. And they were often pooled into bond offerings by Lehman Brothers' Aurora Loan Services unit and Credit Suisse's DLJ Mortgage Capital. Data isn't readily available on the volume of option ARMs outstanding, so the extent of potential defaults is difficult to pin down. As a matter of perspective, there were far fewer option ARMs written than subprime mortgages in recent... http://www.abalert.com/headlines.php?hid=3320 Insured asset-backed securities issuance is just about extinct. During the first six months of 2008, only four wrapped offerings of U.S. asset- and mortgage backed bonds made it to market, adding up to a paltry $1.5 billion, according to Asset-Backed Alert's ABS Database. A year ago, the total was 111 transactions weighing in at $56.1 billion. That's a 97.3 decline. Of course, the mid-2007 total was from a time before the subprime-mortgage industry's collapse led to a debt crisis that eventually cost several of the world's largest bond insurers their most valuable asset: their triple-A ratings. Right now, FSA and former also-ran Assured Guaranty are the structured-finance market's only guarantors to maintain that all-important distinction - and they have accounted for the entirety of this year's wrapped issuance. Gone from the league table are former heavyweights Ambac, FGIC, MBIA and XL Capital, which controlled a combined 78.1 of the market in the first half of 2007. ADB, CIFG and Radian have also vanished. FSA could join them soon as well. Talk has been circulating for a couple weeks that the insurer is gearing up to lay off a large portion of its structured-finance staff, and may stop guaranteeing asset- and mortgage-backed bonds completely. For now, however, the company is the most active insurer of such deals in the U.S. Its tally of three transactions totaling $1.3 billion during the first six months of this year accounted for an 83.4 market share. Assured Guaranty m... http://www.abalert.com/headlines.php?hid=3198 Hopes for a near-term revival in securitization volume are fading quickly. Earlier this year, investment bankers, rating-agency analysts and lawyers who specialize in putting together asset- and mortgage-backed securities were saying issuance volume might pick up in the second half. But more recently, they have come to a consensus that issuers will remain less active - as they have since the mortgage industry's collapse triggered the worldwide credit crash a year ago. So far this year, issuers around the world have sold $510.3 billion of asset-backed securities, residential mortgage bonds, commercial MBS and CDOs, according to Asset-Backed Alert's ABS Database. At that pace, the full-year total would be less than half the $2.2 trillion tally from 2007, which in turn was down from 2006's count of $2.6 trillion. That's a much bigger drop than industry players were projecting heading into this year, suggesting that many underestimated the severity of the debt market's downturn even as the industry was getting clobbered. At this point, the prevailing opinion is that issuance activity will remain at its current pace until early 2009, if not longer. quot;Maybe the recovery is not going to be as bountiful in the second half as people had hoped,quot; said Mark DiRienz, who co-heads ratings on term asset-backed securities in Moody's New York office. quot;If anything, it's more likely that [issuance volume] will be more down than up in the second half,quot; an official from another rating agency said. To be sure, few market... http://www.abalert.com/headlines.php?hid=3060 A year after the structured-finance market entered its worst-ever downturn, it has become increasingly apparent which banks still want to be major players in the business - and which ones don't. Just as they were a year ago, Citigroup and J.P. Morgan are the world's most-active underwriters of asset-backed securities, residential and commercial mortgage bonds and CDOs heading into midyear 2008, according to preliminary information from Asset-Backed Alert's ABS Database. Deutsche Bank and RBS Greenwich also appear to be holding on to top-five rankings. But Barclays, Credit Suisse, Goldman Sachs, Merrill Lynch, Morgan Stanley and Wachovia have seen their standings in the underwriter league table plunge since mid-2007, in some cases by design. Investment banks across the board have spoken of trimming the resources they dedicate to structured-product underwriting. But quantifying the depth of those cuts has been difficult. That task has been made harder by the fact that overall deal output has slowed dramatically, meaning even the institutions that intend to remain active are handling far fewer deals than they were at this point in 2007. To paint a clearer picture, it helps to compare the degrees to which the banks have risen or fallen in the standings. Citi, for instance, has dismissed a wide swath of structured-finance staffers along with thousands of other employees in recent months, responding to some $35 billion of credit-crunch-related writedowns on holdings of various debt products - many... http://www.abalert.com/headlines.php?hid=2953 GMAC is poised to move a big chunk of assets out of a commercial-paper conduit it set up 15 years ago to fund its auto loans, leases and dealer-floorplan credits. The initiative is tied to a credit-crunch-related rejiggering of the liquidity backstops for the vehicle, called New Center Asset Trust. Over time, many of the holdings GMAC pulls from the entity will probably go into nine conduits run by its liquidity providers. GMAC's vehicle, also known as NCAT, has been funding the Minneapolis operation's loans by purchasing triple-A-rated bonds secured by those credits. It had $7.4 billion of its paper in the hands of investors as of April 30, and maintains an overall funding capacity of $12 billion. The conduits lined up to take over NCAT's assets are multi-seller vehicles run separately by Bank of Nova Scotia, BNP Paribas, Calyon, Credit Suisse, Deutsche Bank, J.P. Morgan, Norddeutsche Landesbank, Societe Generale and WestLB. J.P. Morgan is leading the syndicate, which also includes two banks that will take on assets from NCAT, but not through conduits. The plan calls for GMAC to reduce NCAT's buying power by a corresponding amount whenever any of those institutions assumes receivables from the conduit. It's unclear whether GMAC or the banks decide when that happens. The arrangement is part of a far-broader plan by GMAC, unveiled June 4, to refinance $60 billion of debt and prop up struggling mortgage affiliate Residential Capital. It coincides with efforts by the operation to differentiate its auto-lending and... http://www.abalert.com/headlines.php?hid=2814 Global structured-product chief Richard D'Albert was arranging an exit package with Deutsche Bank this week. D'Albert's talks coincided with the departure of lieutenant Erik Falk, whose split from Deutsche had been rumored since last month. In both cases, the individuals were apparently squeezed out of their roles by a restructuring that combines the German bank's securitization, credit-derivatives and special-situations teams. Each was offered a new job at the institution a few weeks ago, but ultimately declined. D'Albert, who had the chance to take a high-ranking sales position, now appears to be considering the launch of an investment firm. There's no word on Falk's plans. He worked a layer under D'Albert with more narrowly focused responsibilities, as global co-head of asset-backed securities with Frank Byrne. Also gone is Michael Lamont, apparently to join an opportunistic investment venture called Seer Capital that's led by former Deutsche executive Phil Weingord. Lamont had been working under D'Albert as head of Deutsche's CDO-underwriting unit - an area he was leading alone since co-head Michael Herzig left two months ago to join McDonnell Investment. It looks like a change in Deutsche's chain of command came with the departures. While it's unclear if the bank has appointed a direct replacement for D'Albert, Elad Shraga, a managing director in Deutsche's global credit-product trading group, has taken over Falk's post. However, Byrne, who previously answered to D'Albert, now reports to Shraga, who in turn works... http://www.abalert.com/headlines.php?hid=2679 J.P. Morgan laid off at least 20 members of its structured-finance unit this week. One of those let go was Randall Outlaw, a high-ranking official who had worn a variety of hats within J.P. Morgan's term-securitization area in New York. There were also extensive cuts in Chicago, where the bank's commercial-paper conduit area was hit particularly hard. Lon Grubb was among the staffers dismissed from that department. The layoffs are apparently linked to a 2,000-person reduction in J.P. Morgan's overall workforce that the bank began carrying out after finalizing its emergency takeover of Bear Stearns last week. J.P. Morgan is also cutting about 7,600 positions at Bear as part of the $1.4 billion deal, which was arranged amid a near-collapse of Bear's operations two months ago. It also doesn't help that the securitization business has undergone a general decline since mid-2007, or that J.P. Morgan has had to write off $5.7 billion of debt-product investments during that time. Indeed, J.P. Morgan had already laid off numerous staffers in response to credit-crunch-related pressures. Still, many industry players thought Outlaw would be untouchable, given the fact that he spent nearly 30 years at the bank. In the securitization area, Outlaw's work at various times included deal syndication and structuring. He most recently reported to asset-backed securities chief Dave Duzyk. Grubb, who is apparently negotiating an exit package, has been involved in securitization since 1987. In 2002, he joined ... http://www.abalert.com/headlines.php?hid=2557 The U.S. Treasury Department is working with Goldman Sachs and Lehman Brothers to create an outlet for billions of dollars of illiquid student-loan securities. Details are sketchy, but the program apparently calls for Goldman and Lehman to create an asset-backed commercial paper facility - either through new or existing conduits - that would fund purchases of auction-rate student-loan bonds by issuing short-term debt secured by those instruments. The effort marks the U.S. government's first significant attempt to address an ongoing freeze-up in the market for auction-rate securities, long-term bonds whose returns mimic those of short-term instruments. Typically, the issues' interest rates reset every 28 days to levels determined through auctions run by Wall Street firms, in a process that also allows investors to cash out. But with credit-crunch-related nervousness infesting all corners of the debt market, the auctions suddenly began failing in February as investment banks balked at supporting the market - leaving holders unable to get rid of their inventories and forcing issuers to pay high penalty rates. Since then, investors have been scrambling for ways to unload the illiquid securities. Many have been pushing for dealers or issuers to buy them back, often to no avail. While auction-rate debt has been used to finance a multitude of undertakings, it was particularly popular among education lenders, including those run by state-government entities. Indeed, rating agency DBRS estimates that $80... http://www.abalert.com/headlines.php?hid=2443 Morgan Stanley has cut a number of high-level staffers from its structured-finance area in recent days, as it carries out the latest reduction in its overall workforce. Laya Khadjavi, the widely known head of Morgan Stanley's CDO-banking group is now gone from that position, but may remain with the institution. Meanwhile, the bank laid off structured-product sales chief Robert Hershy and Mike Pohly, its global head of trading for synthetic CDOs and other credit-derivative instruments. All told, Morgan Stanley plans to eliminate 5 of its staff in the coming months. That works out to about 2,000 staffers, on top of some 3,000 it has cut since October in response to credit-crunch-related troubles. But amid the scads of other layoffs taking place at the bank, the dismissals of Khadjavi and Pohly from their posts especially stand out. The reason: those moves suggest that the institution is partly retreating from the now-treacherous business of underwriting CDOs. Indeed, Erik Siegel, Morgan Stanley's head of funded CDO trading in the U.S., has absorbed Khadjavi's former deal-origination duties - indicating that the bank plans to remain a player in the secondary market for such products, but doesn't expect to lead many new ones going forward. Not that there is much business to go around anyway. Morgan Stanley has run the books on just two CDOs totaling $1.3 billion this year, both in February. Last year, it led 45 CDOs whose funded portions added up to $15.4 billion, making it the world's 13th... http://www.abalert.com/headlines.php?hid=2320 Deutsche Bank is poised to buy up to $2 billion of subprime auto-loan bonds from AmeriCredit, and then stash the illiquid paper in commercial-paper conduits it runs. The triple-A-rated securities, featuring a bond-insurance policy from FSA, will represent a large portion, or perhaps all, of a term securitization that AmeriCredit is about to conduct - with Deutsche running the books. Deutsche's underwriting assignment coincided with an April agreement by the bank to buy the resulting bonds, working through a branch in the Cayman Islands. It plans to syndicate the purchase among several of its conduits, possibly including Gemini Securitization, one of the world's 15 largest CP-issuing vehicles. By splitting up the transaction in such a manner, Deutsche hopes to avoid overwhelming any single conduit with too many subprime assets at once. At the same time, the bank is set to receive underwriting fees in exchange for facilitating AmeriCredit's bond sale through its own vehicles. It will also reap other perks from AmeriCredit, including stock options in the publicly traded lender. AmeriCredit has a year to follow through with the deal, but is expected to move forward within the next four weeks. The agreement marks the first time that Deutsche will have underwritten such a large term securitization for a client with the intent of taking down the transaction through its conduits, as opposed to simply setting up a conduit facility in the first place. Other banks and issuers, meanwhile, are keeping... http://www.abalert.com/headlines.php?hid=2206 Issuers of asset-backed securities have been exploiting a sudden drop in funding costs by rolling out an increasing volume of new deals. At least $12 billion of fresh transactions have hit the market in the past two weeks, which represents a big jump from the $2 billion to $3 billion pattern of weekly issuance that had persisted since the start of this year, according to a research report that Bank of America released Wednesday. The recent rush of deals, most backed by auto loans, credit-card receivables or student loans, coincided with a gradual tightening of spreads on senior portions of such issues. quot;[Issuers] are all trying to be flexible and nimble, trying to hit an opening,quot; one market player said. quot;People want to be able to issue very quickly. They're looking for windows of opportunity, particularly in the auto-loan field.quot; The pipeline of new deals isn't expected to keep gushing for long, however. That's because many lenders remain of the opinion that securitization is still too expensive, especially compared to the low funding costs they enjoyed before the credit crunch pulled the rug out from under the structured-finance market last summer. In fact, while the recent flow seems heavy by today's standards, it remains far below pre-credit-crunch levels. Investors also remain reluctant to buy subordinate bonds, a stance that limits how many senior bonds can be issued. Market players attributed the most-recent drop in funding costs to ongoing efforts by the Federal Reserve... http://www.abalert.com/headlines.php?hid=2075 Merrill Lynch is putting less effort into seeking new assignments to distribute asset-backed commercial paper. Key evidence of the pullback emerged in the past week, as Merrill eliminated all but one member of its CP origination team - a unit that pitches the battered bank's distribution capabilities to conduit operators worldwide and maintains relationships with those shops. Among those on their way out: Stewart Cutler, who has been leading the group. Merrill, however, this week hastened to convey that it will remain active in the sector, reaching out to conduit operators that rely on its dealers to place their vehicles' paper. No one really expects Merrill to retreat from its longtime standing as one of the conduit market's three leading placement agents. But the bank apparently doesn't need so many staffers to drum up new business, since the volume of conduit paper hitting the market has fallen precipitously since mid-2007 and is likely to remain flat for the foreseeable future. quot;They certainly have shut down their origination efforts,quot; one source said. quot;When you reduce the group from four people to one person . . . it's hard to say you're originating mandates.quot; The overall volume of U.S. asset-backed CP in the hands of investors now stands at $763 billion, according to the Federal Reserve. That's down from a peak of $1.2 trillion last August, when the onset of the credit crisis ended what had been a long-running growth streak for the industry. Another likely factor in the reduction of Merrill's CP-dealing... http://www.abalert.com/headlines.php?hid=1957 Secondary-market trading of structured products has picked up substantially in the past two weeks. The uptick is partly attributable to an influx of holders of asset-backed securities, mortgage bonds and CDOs who are willing to accept offers from secondary-market buyers, after seeing bids remain level since late March. The thought is that sellers want to take advantage of the stability, which they view as only temporary. That marks a departure from what was happening just a few weeks ago, when sellers were hiking their asking prices and buyers were reducing their offers - causing so-called bid-ask spreads to widen. Now, as more sellers enter the market and bid-ask spreads gradually close in, trading is on the rise. quot;It seems like there are more people playing. I'm doing more trades than I did a month ago,quot; said David Castillo, managing director at broker-dealer Further Lane Securities. Even with the recent stability, most of the buying is being done by opportunistic fund managers who want to purchase securities far below their par values. Some of those players have recently seen their buying capacities rise, after lining up loans from dealers who received funding from the Federal Reserve's discount window. Some selling, meanwhile, is coming from bondholders who are finally giving up on investments that have plummeted in value since the credit crunch set in with last summer's collapse of the subprime-mortgage industry. Most others just want to unload whatever they can before the market tanks again, ... http://www.abalert.com/headlines.php?hid=1832 Royal Bank of Scotland just laid off a number of securitization professionals from ABN Amro, finally moving forward with cuts that have been looming since it bought the Amsterdam institution's wholesale-banking division last year. The terminated securitization specialists were among at least 25 fixed-income specialists cut loose from ABN's New York and Chicago offices last week. And more cuts are expected to follow in the next two or three months, as RBS begins combining ABN's operations with those of its own investment-banking arm, RBS Greenwich. Topping the list of departing ABN staffers was U.S. asset-backed securities syndicate chief Neil McPherson, who is now looking for a job on the buyside. He had joined ABN's New York office in November 2004, after six years on the ABS-research team at Credit Suisse. McPherson rose to the top position on that desk in 2000, with Credit Suisse adding CDO research to his purview in 2002. His exit from ABN leaves only Joe Wallace, who usually handles secondary-market business, to man what remains of the bank's asset-backed bond trading desk in the U.S. Wallace reports to financial-markets chief Denis McHugh, although that could change as RBS shuffles management duties going forward. RBS also showed the door to many of ABN's bond-sales specialists, including Trevor Lange, Mark McAdams, John McShea, Tim Murphy, Michael Naher, Mike Primasing and Tom Warnock. They often pitched securitizations as part of a Chicago-based team of quot;generalistsquot; led by John Koudounis, who still has his... http://www.abalert.com/headlines.php?hid=1700 The values of asset- and mortgage-backed securities could soon be under assault, as managers of ailing CDOs dump boatloads of mortgage-related collateral on the secondary market. Prices on structured securities have generally leveled off after plummeting in February and the first half of March. The same is true for credit-default swaps that mimic Markit's ABX index, which references pools of securitized subprime mortgages. But buysiders see that stability in jeopardy, even though demand is picking up in the secondary market. That's because market technicals are likely to be upset by a recent jump in bond offerings. This week, Wall Street traders started rolling out bid lists containing more than $8 billion of structured products that serve as collateral for troubled CDOs. Bids on many of those offerings will be accepted next week. Handicapping the near-term impact of the sell-off is difficult, largely because CDO-collateral offerings usually take weeks or even months to play out. What's more, some sale prices aren't entirely meaningful because super-senior noteholders are essentially buying the collateral from themselves, according to the head of one asset-management shop. Such buybacks are meant to make it easier for those investors, who often control the CDOs, to value their assets. They also keep traders occupied. The money manager asserted that the current wave of offerings quot;will not be soaked up immediately without somewhat higher yields to entice new money.quot; To be sure, managers of opportunistic investment funds... http://www.abalert.com/headlines.php?hid=1554 The securitization industry is getting its first glimpses of how deal flow might shape up in a post-mortgage-collapse environment. During the first three months of 2008, $131 billion of new asset-backed securities, residential and commercial mortgage bonds and CDOs found their ways into the hands of investors worldwide - down 81 from $701 billion a year earlier, according to Asset-Backed Alert's ABS Database. The composition of those transactions, meanwhile, has undergone a tremendous transformation. Much of that results from a dearth of mortgage-related transactions in the U.S. A year ago, non-agency mortgages to prime-quality borrowers accounted for more securitizations than any other type of asset, at 22.4. Today, those deals make up only 7 of year-to-date deals. CDOs are in the midst of a dramatic pullback as well, falling from 21.1 of the new-issue market a year ago to 10.7 today. Subprime-mortgage deals, likewise, represented 12.4 of securitization activity at this point in 2007. Now they come in at a miniscule 1.7. Home equity loans have dipped from 1.4 to zero. Non-U.S. mortgages have seen issuance decline as well. But with a 22.4 market share, they now stand as the busiest asset class worldwide. Credit cards and auto loans, meanwhile, represented the only significant areas of growth during the first quarter of this year. These days, 21.8 of all new securitizations are backed by credit cards, up from 3.6 a year ago, as new-deal output jumped slightly... http://www.abalert.com/headlines.php?hid=1419 The credit crunch has sent securitization volume back to turn-of-the-century levels. According to preliminary figures from Asset-Backed Alert's ABS Database, a mere $120 billion of asset-backed bonds, CDOs and residential and commercial mortgage securities priced worldwide during the first three months of this year. That's an 83 drop from the first quarter of 2007, when $702 billion of such transactions came to market. The deal count plummeted to roughly 130 deals in the January-March stretch, from nearly 900 a year ago. But of course, the year-earlier count came before the subprime-mortgage meltdown sent the securitization industry into near-lockdown mode. The last time a year got off to this slow of a start was 2000, when worldwide securitization volume for the first quarter totaled about $100 billion. What does that mean for issuance volume going forward If it was to continue at the current pace, less than $500 billion of new ABS, CDOs and private-label MBS would be sold this year - less than one-fifth of the $2.7 trillion issuance peak reached in 2006. It would also mark a slight slowdown from 1998, 1999 and 2000 totals, each of which were right at or slightly above the half-trillion-dollar mark. However, the credit market wasn't in such dire straits back then, and this year's activity could fluctuate in response to even slight indications that conditions are changing. Industry players are, therefore, reluctant to venture guesses about where deal flow is headed,... http://www.abalert.com/headlines.php?hid=1291 At least seven structured-product specialists have left RBS Greenwich for buyside roles this month, including securitization-underwriting co-head Joe Walsh. Walsh is headed to Fortress Investment. The early word is that his assignment will be to build a team that would invest in structured products whose values have plunged during the credit crisis - placing New York-based Fortress among an ever-growing list of firms that have been launching such opportunistic initiatives in recent months (see listing on Page 7). While details remain scarce, Fortress could bring tremendous buying power to the table, given the $40 billion of equity that the outfit already runs through its private equity funds, hedge funds and real estate vehicles. As for Greenwich, Walsh's departure would appear to leave his co-head, John Anderson, in charge of the Royal Bank of Scotland unit's asset- and mortgage-backed securities underwriting area. That group, which derives the bulk of its business from home-loan securitizations, has seen its deal flow dry up since the market for those transactions imploded last summer. Nonetheless, Greenwich's higher-ups tried to convince Walsh to stay. quot;[Fortress] just made him an offer he couldn't refuse,quot; an insider at the bank said. Walsh served two tours of duty with Greenwich over the last 13 years. The first began around 1995, when he took a job as a vice president in the home-loan securitization area of predecessor Natwest Capital. He then became part of the Greenwich t... http://www.abalert.com/headlines.php?hid=1150 The secondary market for asset- and mortgage-backed securities felt another bout of pain in recent days, as the holdings of a troubled Carlyle Group hedge fund flooded into the market and credit-crunch-related fears kept buyers at bay. The upshot is that market conditions, which have been shaky at best for some time, are unlikely to improve in the foreseeable future. quot;This week has probably been the toughest to date,quot; said David Castillo, who oversees structured-product trading at broker-dealer Further Lane Securities. While the Carlyle Capital fund is just one of many alternative-investment vehicles collapsing amid the ongoing credit crisis, the liquidation of its assets over the past few days has had a particularly strong effect on market technicals. Much of that had to do with the entity's size: Prior to its blowup, it was holding more than $21 billion of top-rated mortgage bonds, most bought on borrowed money. When Carlyle was unable to meet demands of repayment from margin lenders late last week, those institutions - including Bear Stearns, Deutsche, J.P. Morgan and Merrill Lynch - began selling its assets. By the middle of this week, they had unloaded more than $10 billion of the investments. Washington-based Carlyle acknowledged on Wednesday that it expected margin lenders to seize the remaining holdings of its fund, leading to a shutdown of the vehicle. As those investments continue to stream into the secondary market, meanwhile, it is becoming harder for other sellers to comp... http://www.abalert.com/headlines.php?hid=1022 Originations of student consolidation loans have gone into a deep freeze. While lenders had already been trimming their consolidation-loan activities slightly over the past year, a convergence of rising business expenses, changing borrower habits and credit-crunch-related pressures have more recently caused production to take an even-steeper decline. The upshot is likely to be a tremendous scaleback in overall student-loan securitizations in the months ahead, as consolidation loans had accounted for the bulk of the collateral for those deals in recent years. Indeed, just four student-loan securitizations totaling $4.6 billion have come to market this year, three from Sallie Mae. And none have been backed by consolidation loans, which borrowers use to combine multiple college debts into single obligations. That partly reflects a scaling back of Sallie's consolidation-loan activities. In 2006, Sallie completed 10 asset-backed bond offerings totaling $33.7 billion. Nine of those deals, adding up to $31.2 billion, were backed by consolidation loans, according to the company. By 2007, five of eight Sallie deals, or $16.1 billion of a $26.8 billion total, were secured by such credits. Nelnet, meanwhile, stopped writing consolidation loans altogether as of Jan. 28. The Lincoln, Neb., lender issued nearly $4 billion of student-loan bonds last year, a good chunk of which was backed by consolidation credits. This week, Nelnet completed its first offering of the year, a $1.2 billion issue backed by traditional... http://www.abalert.com/headlines.php?hid=883 Bond insurer CIFG has rearranged the leadership of its structured-finance team, amid ongoing worries about exposures the group took on asset- and mortgage-backed bonds of questionable quality. Andy Dym, who presided over the entire structured-finance group, was laid off this week along with at least 10 other staffers from various areas of CIFG. Also among those let go was one of Dym's three U.S. lieutenants: Avi Oster, who led a division that applies CIFG's triple-A-rated guarantee to securitizations of commercial assets such as equipment leases, aircraft receivables and insurance premiums. Meanwhile, Evy Adamidou, who was Oster's counterpart on the CDO side, was reassigned to head of surveillance. She's now responsible for monitoring of outstanding structured products and municipal bonds with CIFG policies. That leaves Victor Mahoney in charge of the structured-finance team. In addition to stepping up to Dym's broader role, he still holds his old responsibilities a layer down as head of a division that covers securitizations of home loans and other consumer assets. The shakeup came just days after Moody's placed CIFG on watch for a possible downgrade, citing concerns that the insurer won't be able to cover claims tied to guarantees it wrote on now-troubled CDOs backed by mortgage-related securities. CIFG is now working quot;closely with Moody's and exploring its options,quot; spokesman Mike Ballinger said. Samp;P, however, has since reaffirmed a top rating it maintains on CIFG - indicating that the company has enough cash... http://www.abalert.com/headlines.php?hid=776 It is now more certain than ever that structured investment vehicles are going extinct. While it has been clear for some time that most of the once-flourishing securities-arbitrage vehicles would be unable to survive the ongoing credit crunch, the possibility recently lingered that a few might endure. As market conditions continue to deteriorate, however, the question among industry players has shifted from whether the entities will die off to when the end will come. The answer: At the rate SIVs have been disappearing in recent months, none will remain active at yearend. The volume of senior SIV paper in the hands of investors worldwide stood at $231 billion at the end of 2007, down from $260 billion a year earlier and a peak of $352 billion at midyear, according to data from Moody's and Samp;P. However, the deterioration has been more rapid than those figures might suggest - as the total is bolstered by vehicles that still owe money on defaulted obligations or that are on life support from their sponsors as they take steps to unwind. In fact, just two or three of the 30 SIVs that were in issuing mode last year have made it this far without beginning to shut down or without being propped up by their operators. One of them is Gordian Knot's Sigma Finance. That fund launched in 1995, during a bull market for the types of securities it purchases. It went on to build up a diverse book of investments, consisting of both secured and unsecured debt. Newer SIVs, by contrast, have typically invested more heavily... http://www.abalert.com/headlines.php?hid=27171 Education lenders are flocking to traditional student-loan securitizations for funding, following a recent lockup in the market for auction-rate offerings. Brazos Higher Education of Waco, Texas, and EdSouth of Knoxville, Tenn., are among the companies that are revising their funding strategies in response to the market shift - with both working to issue greater volumes of conventional asset-backed securities with floating interest rates. Others are sure to follow. Companies like Brazos have long issued a mix of auction-rate bonds and Libor-based floaters to fund their loans, so the change of direction doesn't bring them into completely unfamiliar territory. It does, however, add to an ever-growing list of evasive maneuvers that finance shops have had to make as the broader debt market has been pummeled in recent months. In the latest turn of events, investors this week rejected tens of billions of dollars of auction-rate securities in the market out of fears that credit problems first seen among subprime mortgages are spreading. That left issuers of the bonds unable to secure new funding at costs they could stomach and caused the rates they pay on outstanding debt to spike. Auction-rate securities are long-term bonds whose returns mimic those of short-term products. Typically, the securities' interest rates are reset every 28 days to levels determined through investor auctions - a process that also allows current holders to unload them. When those auctions fail, and brokers decline to take down the... http://www.abalert.com/headlines.php?hid=555 Hoping to stave off downgrades, the three largest private mortgage insurers are in talks with private equity firms that might bolster their capital reserves. What's known so far is that Mortgage Guaranty Insurance, PMI Group and Radian have held such discussions in the past week or so, and that the firms they have met with include J.C. Flowers amp; Co., Lightyear Capital and Stone Point Capital. The mortgage insurers' rating outlook has already been unsteady for a while. About a week ago, Moody's added to the uncertainty by placing the quot;Aa2quot; grades of MGIC and PMI and the quot;Aa3quot; mark for Radian on review for possible downgrades. At issue, again, are failing residential mortgages. Private mortgage insurers write policies for home buyers who can't come up with the 20 down payments typically required by lenders, agreeing to cover portions of the debts in the event of default. That leaves the companies especially exposed to subprime borrowers, who frequently have little or no equity in their homes - and who have been missing payments with increasing frequency. Defaults among insured mortgages rose 37 in December from a year earlier, to more than 64,000, according to trade group Mortgage Insurance Cos. of America. By fattening reserves, the insurers would boost their abilities to pay claims related to those defaults, and thus seek to avoid the threatened downgrades. MGIC, for example, recently said it expects to book $1.8 billion to $2 billion of losses this year due to a rise in claims, up from the $1.2 billion to $1.5... http://www.abalert.com/headlines.php?hid=419 Plenty of work awaits the nearly 6,000 individuals who are heading to Las Vegas this weekend for the American Securitization Forum's annual industry conference. In the past, such gatherings have been marked by non-stop partying, golf and other off-site distractions, often funded by seemingly bottomless entertainment budgets that accompanied what had been furious market growth. But that was before the credit crisis shut things down. This year, many dealmakers expect to spend their four days at the Venetian Hotel hunkered down in meeting rooms with business contacts as they address ways to weather the prolonged market slump. The 1,500 investors on hand will be especially busy. To be sure, many conference-goers will be buzzing about Samp;P's Thursday downgrade of FGIC's bond-insurer rating to quot;AAquot; (from quot;AAAquot;). They'll also want to compare notes about MBIA and XL Capital, whose top ratings the agency put on watch for possible downgrades. The ASF conference begins Feb. 3. While a good number of buysiders will undoubtedly take time off to watch the Super Bowl that day or head off for various diversions later in the week, they also view the ASF summit as a rare opportunity to meet with servicers of securitized loans. And that will take up much of their time. Servicers have come into the spotlight in recent months as loan performance has plummeted, and holders of bonds whose payments depend on those cashflows want to know more about what the shops are doing to keep up on collections. quot;We're hoping to meet with as many... http://www.abalert.com/headlines.php?hid=299 Trading of structured products picked up on the secondary market this week, as dimming prospects for an end to the credit crunch prompted investors to let go of their holdings at heavy discounts. Opportunistic buyers said that sellers became more receptive to what had been below-market bids on Tuesday, when the Federal Reserve surprised many financial-market participants by cutting its overnight lending rate by 75 bp, to 3.5. A handful of new deals, backed mainly by credit-card receivables and auto loans, also priced at wider spreads than they would have a week ago. The reason: Even as the rate cut move cheered some areas of Wall Street, fund managers and investment banks that have been trying to unload huge structured-product inventories took the news as an indication that the Fed believes the credit crisis is still going strong. That means their holdings - especially those tied to the same troubled mortgage products that caused the debt-market squeeze- could continue to lose value in the months ahead. Faced with that possibility, many are hoping to salvage some value by dumping already-devalued positions now. The Fed's move, meant to stave off a possible recession, could be followed by another 50 bp cut at its Jan. 29 meeting. Adding to bondholders' nervousness is the possibility of more rating downgrades among bond insurers (see article on Page 1) and a continuing stream of dismal 2007 earnings reports from industry players. Bond insurer Ambac, for example, this week reported a $3.3 billion net loss for ... http://www.abalert.com/headlines.php?hid=175 Any hopes that structured-product values would improve in the near future were dashed this week, as market players reported writedowns that set disappointingly low pricing benchmarks. Even as trading of asset-backed bonds picked up from a week earlier, bond buyers were clearly unnerved by dismal fourth-quarter earnings reports from Citigroup, Merrill Lynch and Ambac, among others (see listing on Pages 12-13). Taken together, the disclosures paint an uglier picture of the worldwide credit crunch than many market players were hoping to see heading into 2008. quot;The writedowns that you see, they're big numbers,quot; Wachovia researcher John McElravey said. quot;It helps contribute to the environment in which we're still a long way from being out of the woods, in terms of the credit crunch.quot; The result is that most asset- and mortgage-backed bonds are worth less than they were a week ago, continuing a slide that began in November. For several weeks before that, industry participants enjoyed a period of stability as the credit crunch appeared to wane - only to come back in force. The latest slide is due in part to opportunistic buyers who interpreted the industry's most recent troubles to mean they should demand bigger discounts on structured products for sale in the secondary market. quot;This is probably as bad an environment as I can remember,quot; one trader said. Merrill and Citi, in announcing massive writedowns this week, also went a long way toward setting new points of reference for the... http://www.abalert.com/headlines.php?hid=65 Don't look for securitization volume to rebound in the U.S. or Europe anytime soon. Industry experts in both regions are calling for 2008 issuance totals to come up well short of 2007 levels - offering one of the first real glimpses of the post-credit-crunch market landscape. The projections also offer a reiteration of how the subprime-mortgage crisis created a domino effect that drove investors away from all types of structured products and jacked up funding costs, especially after midyear. In the U.S., a field of 16 market players surveyed by Asset-Backed Alert have forecast, on average, that issuers will sell $459 billion of new SEC-registered, and Rule-144A asset-backed securities in 2008. That translates into a 22 drop from the 2007 total of $594 million, which in turn represented a steep plunge from the 2006 count of $907 billion. In fact, if the 2008 estimates prove correct, the once-booming U.S. market would experience a five-year setback in deal flow, according to Asset-Backed Alert's ABS Database. The projected 12-month total would be only slightly above the tally for the first six months of 2007, which stood at $431 billion. In Europe, 10 specialists are calling for a 2008 decrease of 35, to $341 billion. While that dip is larger than the one forecast for the U.S., the opposite was true in 2007, when issuance in Europe fell just slightly, to $521 billion from 2006's $526 billion despite a broad lack of liquidity. The 2008 estimate would rewind European issuance to 2005 levels. The bearish 2008...