Asset Securitization Report articles from July 2003

Asset Securitization Report archives from July 2003

Whispers.
July 7, 2003... Former Morgan Stanley ABS pro Caroline Morrill has started in her new position as head of ABS syndicate at ABN AMRO, where she will be a managing director (see ASR 6/30/03). The addition of Morrill, a longtime veteran of ABS syndicate and...

Latin America second quarter: Mexico flexes while Cross-border dawdles.
July 7, 2003... A film critic with an odd side interest in Latin American securitizations might give this review to the second quarter: "Mexico was a tour-de-force, a pent-up pipeline in the cross-border failed to unravel, and the smaller domestic roles played...

First CDO of ABS for Japan But will it drive the volume?
July 7, 2003... Japan saw the first public CDO of ABS emerge last week, Dawning Global Asset Funding, a 69.3 billion (US$58 million) synthetic transaction originated by Sumitomo Trust and Banking. The deal is backed by a portfolio of 70 billion (US$59...

Cendant lets the inspiration flow.
July 7, 2003... Borrowing from the credit card, mortgage and CDO sectors, Cendant Corp. has unveiled the latest structural innovation to the ABS market. Named Terrapin Funding, structural advisor and underwriter Lehman Brothers has developed a transaction that...

Few changes for Constellation, following Soc Gen purchase.
July 7, 2003... Operations and issuance for mutual fund industry risk manager Constellation Financial Management are not expected to dramatically change following the announcement that it agreed to be acquired by French investment bank Societe Generale for an...

HELs repacked into CDOs at furious pace.
July 7, 2003... A slew of multisector CDO repacks has hit the new issue market over the last two weeks. A closer look reveals the collateral has overwhelmingly been real estate-related, no surprise given the pace at which the home equity market has been...

July 4th, start of 3Q03 leads to slow ABS week.
July 7, 2003... A holiday-shortened trading week, coupled with the typical slow start to a new quarter, left the ABS primary market nearly devoid of activity last week. Just $3.15 billion priced, including an EETC, while an additional $3.8 billion was readied...

UBS Warburg outlines the uncertainty trade.
July 7, 2003... In last week's CDO Insight, UBS Warburg researcher Douglas Lucas highlighted the "CDO strangles" trade, where an investor takes a long position in a CDO sub tranche and shorts the seniors. The investor in this situation benefits if the...

European defaults drive synthetic CDO volatility.
July 7, 2003... The message from overseas is clear: murky waters still cloud Europe's CDO market, which has a strong taste for synthetics. Seemingly ageless corporate names, such as Enron Corp. and Worldcom Inc., continue to dominate already battered...

Single-tranche CDOs: Fitch cautions.... Sellers retort.
July 7, 2003... As the execution of traditional, fully tranched synthetic CDOs continues to be challenging, investment banks are reporting increased appetite for single-tranche CDOs (STCDO), which allow investors to choose custom risk/reward profiles. ...

DVI's future debated, U.S. Bank scrutinized: S&P holds firm on ABS ratings.
July 7, 2003... The new spate of negative headlines surrounding specialty medical equipment leasing concern DVI Inc. spread further to its outstanding ABS last week. Two of three rating agencies downgraded DVI's ABS after the Securities & Exchange Commission...

Merrill Lynch reinvesting' in structured finance.
July 7, 2003... Following a string of significant hires and the realignment of several origination efforts, Merrill Lynch could once again be a player in the asset-backed league tables, intentionally or not. The bank, which consistently owned the market...

UBS leads in MBS with Goldman Sachs a close second.
July 7, 2003... As is generally the case, UBS Warburg topped the manager activity rankings for both agency and non-agency MBS, according to final results from Thomson Financial's RMBS 2003 first-half league tables. UBS edged out its competitors in the...

Nomura studies CMBS credit migrations.
July 7, 2003... Nomura Securities recently released a report on the timing issues in rating agency downgrades and surveillance of CMBS deals. The report said that CMBS investors can use the study's results to develop expectations about how the three rating...

No peak in speeds seen in July, analysts said.
July 7, 2003... The prepayment data for June, which is due to be released this Tuesday, is not expected to show peak prepayment speeds. Kevin Jackson, vice president at RBC Dain Rauscher, said in a report released last Wednesday that except for newer...

Is there default risk in agency MBS?
July 7, 2003... With the headline risk surrounding Freddie Mac and Fannie Mae, investors are beginning to question the credit quality of agency MBS. With this in mind, Deutsche Bank calculated the default risk in this sector, and concluded that it was minimal....

First ABS with international standards structured in Poland.
July 7, 2003... Although Poland has seen a few domestic securitization programs, until now it had not seen a deal that had achieved ratings to international standards. "The first structured finance transaction, which has been structured to international...

Beyond U.K. credit cards, a whole continent left to securitize.
July 7, 2003... European credit cards are evolving into a sizable, homogenous asset class, although, compared to the U.S. counterpart, it still remains relatively untapped. While originators over the last couple of years have made significant headway in the...

Merrill upsizes deal for Brazilian money shaker Visanet.(Brief Article)
July 7, 2003... So-called "plastic currency" charged up an impressive final tally last week as investors oversubscribed the Merrill Lynch-led pricing for Visanet. The credit-card deal closed upsized at US$500 million, market sources report. The deal had...

HBOS initiates U.K. covered bond market.
July 7, 2003... HBOS unveiled its E14 billion (US$16.4 billion) synthetic covered bond program last week, expecting to deliver its first issue by the end of July. Market analysts are certain that the HBOS program will open the door for other U.K. mortgage...

Whispers.
July 14, 2003... Merrill Lynch has hired Steve D'Agostino as a director in its CDO group from Credit Suisse First Boston. D'Agostino reports to group head and former boss Christopher Ricciardi, who joined Merrill from CSFB earlier this year. D'Agostino was head...

Is there ABCP post-FIN 46? Conduits are more costly, less nimble and, for some, a royal pain in the...
July 14, 2003... NEW YORK - With the deadline for conduit restructuring having come and gone, some of the banks still on the restructuring pike - and apparently there are many - may rather be working to deconsolidate the assets they'll take on for the reporting...

LatAm Summit taps optimistic vein: Hard lessons mask giddy side.(Industry Overview)
July 14, 2003... MIAMI - At the second annual conference on Latin American securitizations, speakers offered hardheaded wisdom born of tragedy, but a more visceral mood of delight also made the rounds. "We've really finally put the crises of the last few years...

Lehman ABS Index posts best half ever.(Industry Overview)
July 14, 2003... Bolstered by a rebounding manufactured-housing sector, the Lehman ABS Index posted its strongest half-year of returns versus Treasurys, according to Lehman Brothers researchers. Most of the record performance came in the first quarter, analysts...

Refi wave, alternative products spark student loan issuance.
July 14, 2003... Much like the home equity sector, the student loan sector of the ABS market is booming on an unprecedented refinance wave that has boosted issuance to what will likely end up being record levels. To date, the term market has absorbed nearly $20...

June volume down, July surges mysteriously.(Industry Overview)
July 14, 2003... The asset-backed commercial paper market saw an apparent spike in volume during the first two days of July. According to figures posted by the Federal Reserve, month-end outstandings in June came in at just below $720 billion, though the Fed...

Auto deals lead slow, post-holiday ABS primary.(Industry Overview)
July 14, 2003... It was a rather slow, uninteresting week of trading in the U.S. ABS primary market, with a pair of auto deals highlighting the new issuance. Total volume came in just over $6.3 billion, with home equity issuance accounting for $2.1 billion of...

U.S. CDO issuance: sipping chilled lemonade at a relaxed pace.(Industry Overview)
July 14, 2003... The summer lull descended upon the market as CDO issuance reached paltry levels last week. While arbitrage and structured product CDOs make up the bulk of the current pipeline, market talk focused on high yield loan-back vehicles and...

Fitch outlines new CDO quantitative criteria.
July 14, 2003... By Richard V. Hrvatin, Dr. Stefan Bund, John Schiavetta, and Kenneth Gill of Fitch Ratings Fitch Ratings will launch its global CDO criteria this week with a series of conferences held in major European cities. The new criteria apply to...

June refi report shows increases in 5.5s.(Industry Overview)
July 14, 2003... The June prepayment report, released last Tuesday, showed prepayments on FNMA 30-year 5.5s increased to an "eye-popping" 42 CPR, which is a 159% rise from May, said analysts from Credit Suisse First Boston. Recently originated 30-year...

Rising interest rates are not a risk for ARMs.
July 14, 2003... In a conference call last Tuesday discussing the impact of current historically low rates on adjustable rate mortgages now being originated, Standard & Poor's has concluded that a rise in interest rates would not cause adjustable-rate mortgage...

Liquidity is not out of the question for portable mortgages.
July 14, 2003... Despite criticism that the portable mortgage product, which was recently introduced by E*TRADE Mortgage Corp., would have difficulty developing enough supply going forward, executives at the company believe that as lenders learn about this new...

Rating agencies comment on changes in the Parity Act.
July 14, 2003... The newly effective changes to the Alternative Mortgage Transaction Parity Act will have a definite impact on the mortgage market. In a report released last Thursday, Moody's Investors Service said that The Parity Act changes would affect...

TSI take off closer as trade-tax law sees light of day.
July 14, 2003... Seven new banks signed the joint letter of intent associated with the much-anticipated German true-sale initiative, drawn up between the original six participating institutions earlier this year (see ASR 6/9). Thirteen banks are now part of the...

In defense of yield: Why U.K. cards sport rocketing APRs.
July 14, 2003... The higher yield of portfolios is one of the key reasons that U.K. credit cards are more attractive to some investors than U.S. cards. Competition and regulation, however, could siphon that advantage away from the U.K. card lenders. "One...

Euro market: KfW moves in on U.K. terrain.(Industry Overview)
July 14, 2003... Flows still remain active as the European market enters the thick of summer. Sources say that the pipeline is still relatively full, with new issues replacing deals as they price. The latest transaction from Provide, the ever-active...

Correction:.(Brief Article)
July 14, 2003... In a story in last week's ASR, it was inaccurately reported that Fitch Ratings downgraded all of DVI Inc. outstanding ABS. Fitch downgraded just the C-class of 1998-1, which is backed by a corporate guaranty, and placed the remainder of DVI's...

Whispers.
July 21, 2003... In a restructuring within the bank, Banc of America Securities named managing director Pat Augustine head of a new product group overseeing ABS, MBS, investment-grade debt and non-leveraged loan operations. The group is called "Debt Operating...

RRB sector leader Texas aims to set best practices: CenterPoint plans largest-ever stranded cost ABS.
July 21, 2003... CenterPoint Energy, which hopes to bring the largest ever stranded cost offering next year, has taken steps,at the request of regulators to increase transparency in its deals, hopefully leading to a sector-wide trend. Interestingly, several...

Welcome Break restructuring.
July 21, 2003... Welcome Break plc, the U.K.-based motorway operator, was back in the market negotiating yet another round of refinancing in an attempt to save its securitization from falling into junk oblivion. The ratings saga for this operating company...

Brazil cross-border picks up.
July 21, 2003... After months of the occasional cross-border saunter, Brazil is now moving at a rhythm worthy of samba. Hot on the heels of credit card processor Visanet, three issuers from the Latin giant have descended on cross-border investors over the last...

Let the balance sheets swell: So begins the next round of FIN 46 disclosures...
July 21, 2003... In an investor presentation, General Electric said it has consolidated $50 billion in assets and liabilities associated with the implementation of FIN 46. Of that, roughly $36 billion is associated with securitization, which presumably includes...

Susquehanna auto lease ABS circumvents vicarious liability.
July 21, 2003... Two insurance policies and a backstop guaranty have been structured into the Susquehanna Bancshares auto lease transaction, to quell investor concerns over vicarious liability laws currently in effect in New York, which accounts for 66% of the...

Wide array of assets make the rounds in $8 billion ABS primary.
July 21, 2003... The U.S. ABS primary market wrapped up last week with nearly $8 billion priced in a wide variety of asset classes and a full pipeline for the week ahead. While home equity ABS continues to dominate supply, last week saw equipment loan...

DVI spreads widen, then tighten on rescinded technical default.(Brief Article)
July 21, 2003... Spreads for outstanding DVI Inc. medical equipment ABS resembled an accordion last week, widening 200 to 300 basis points after word spread that it was in technical default on its unsecured debt obligations. Levels rebounded, however, after the...

Correction.(Correction Notice)
July 21, 2003... A cover article on 7/14 "LatAm Summit" incorrectly attributed an opinion on the true sale nature of an airline-ticket receivables deal to Douglas Doetsch of Mayer Brown Rowe & Maw. Doetsch actually believes that Colombian law upholds the true...

Summer reading: CDOs the name, rating's the game.
July 21, 2003... With a bit of lag time built into the moderately paced summer market, rating agencies have issued their own version of summer reading material. Though not exactly the page-turner that Harry Potter proves to be, recent rating agency methodology...

Market approves Citi's alliance with Sears.
July 21, 2003... On active trading last week, spreads for Sears Roebuck & Co. credit card ABS tightened 10 to 20 basis points on the news that its operations would be purchased by Citigroup. Boosting momentum was the news that, in addition to the portfolio...

Another lender takes to equity markets; how much will CapitalSource sell for?
July 21, 2003... Specifics around the proposed IPO of CapitalSource Inc., a commercial finance lender and repeat ABS issuer, continue to remain hazy despite the fact the company issued an amended filing last week with the Securities and Exchange Commission. The...

Credit profile of S&P rated CMBS.
July 21, 2003... By Joseph Hu, Ph.D., Managing Director, and Roy Chun, Managing Director, Standard & Poor's This article is an abridged excerpt of a larger report, "Credit Profile of Standard & Poor's Rated U.S. Commercial Mortgage Loans," a first-ever,...

-ST_BY-.
July 21, 2003... Originator supply, convexity selloff cheapens mortgages Mortgages were slammed last week on the selloff, magnified by convexity-related selling from mortgage participants. Since Friday, July 11, the 10-year yield has backed up 35 basis...

Watch out for extension, but don't forget contraction.
July 21, 2003... With the recent selloff, the catch phrase in the mortgage market last week was extension risk as Street research devoted many pages to the topic. For instance, in a report released Monday, Lehman Brothers said that considering the cuspy...

Fannie's portfolio commitments hit the roof.
July 21, 2003... Fannie Mae reported last week that its portfolio commitments rose to a new high of $75.5 billion in June, rising from $73.8 billion in May. This brings outstanding portfolio commitments to a record $134.6 billion at the end of last month. ...

Chile offers slow but steady going for players.
July 21, 2003... While a squadron of structured bankers from the U.S. and Europe invade Brazil and Mexico, Chile, as usual, sits quietly beyond the horizon. For the troops, domestic volumes are not big enough to get pulses racing, and cross-border opportunities...

Nuevo Leon roars, in an echo of State of Mexico deal.(Brief Article)
July 21, 2003... One of Mexico's most robust states is getting in on the structured act. Nuevo Leon is securitizing payroll taxes in a 12-year transaction sized at US$978 million (US$94 million). With Value Casa de Bolsa as lead, the deal is the second...

Argentina's matchmakers wed local investors & exporters.
July 21, 2003... More than a year and a half since Argentina erupted, the cross-border market is still hostile territory for the country's structured issues, save for the well-tested name of YPF. Local investors have been more receptive, arguably for no other...

European heat wave continues: You've got to wonder, is there a summer break in sight?
July 21, 2003... Though typically during the summer months the European market slows for the sunshine and vacation, the downpour of deals is lasting well into July. By Wednesday last week, the market had seen at least E6 billion (US$ 6.7 billion) in new...

ECP growth in line with market expectations.
July 21, 2003... This month, Fitch Ratings published its first edition of the European ABCP Papertrail, highlighting the significant growth of European commercial paper. The numbers are not entirely surprising, and they remain largely in line with market...

Whispers.
July 28, 2003... ABCP guru Sam Pilcer has resigned from his position as managing director and head of the conduit group at Moody's Investors Service, effective Aug 1. Pilcer, who had been with Moody's for more than 10 years, will continue working with Moody's...

Student lender AMS sends ripples through the market: Unwrapped deals remain on neg watch...
July 28, 2003... Yet another scandal hit the ABS market last week, as Academic Management Services Corp., a unit of financial services and insurance conglomerate UICI, announced inaccuracies and collateral shortfalls within its single-seller ABCP conduit, EFG...

CSFB joins CDO/ Intex bandwagon.
July 28, 2003... The martini of CDO maturation was shaken and stirred last week when Credit Suisse First Boston announced it had undertaken a major transition toward CDO transparency, joining other top-ranked firms that are now disseminating deal structure and...

FASB posts final staff positions.
July 28, 2003... During last Wednesday's Financial Accounting Standards Board meeting, the staff decided to not object to three of the five FIN 46-related FASB staff positions (FSPs), to approve another, and to reconsider or potentially revise the remaining...

IRS proposals rules for tax treatment of inducement fees.
July 28, 2003... At least two law firms last week provided summary comments to their clients on the new Internal Revenue Service proposed regulations for treatment of inducement fees paid to holders of the non-economic residual interest in real estate mortgage...

JPM/Bank One new trustee powerhouse.
July 28, 2003... JPMorgan Institutional Trust Services' acquisition of Bank One's corporate trust services will create a new leader in the structured finance industry, with the combined entity acting as trustee on more securitized product sold this year than...

HELs lead long-awaited $10 billion week: AmeriQuest, Chase top list.
July 28, 2003... Large offerings in the auto loan, home equity and aircraft lease sectors pushed the US ABS primary market over the $10 billion mark for the first time since mid June. AmeriQuest Mortgage, Chase Manhattan Bank, and aircraft leasing firm Aviation...

Auto lenders prep spate of deals.
July 28, 2003... Amid a slowdown in the auto sector of the ABS market, at least five somewhat programmatic, but off-the-run auto lenders are prepping transactions for the near term. The group of issuers, which have recently filed with the Securities and...

Synthetic CDOs gain market share in U.S.
July 28, 2003... Synthetic CDOs, those funny-sounding transactions that ride the roller coaster credit derivatives market, have found an increasing number of friends in the U.S. While the volume of synthetic transactions has risen globally, the real story lies...

Prepayments set for slowdown in the fall.
July 28, 2003... Mortgage flows have been at the mercy of Treasury market performance. Last week, the sector was mostly hit by supply, increased investor selling and limited buying as the market traded south. The one exception was mid-week when Treasurys...

PAC sector serves investors well in rate backup.
July 28, 2003... With the backup in rates, investors are starting to focus on issues of average life and duration risk. In a recent report, Countrywide Securities highlights the attractiveness of the PAC (Planned Amortization Class) sector resulting from...

Are specified pools a good cover for extension risk?
July 28, 2003... With extension risk now at the forefront, interest in call protection from specified pools has diminished slightly, said JPMorgan Securities in a recent report, concluding that different specified pools offer varying degrees of extension...

Freddie releases report on accounting irregularities.
July 28, 2003... In addition to placing much of the blame for the improper accounting on former Freddie Mac executive David Glenn, last week's release of a investigative report on the GSE made repeated references to former Freddie Chairman Leland Brendsel as an...

European market nearing E6 billion/wk average.
July 28, 2003... Structured credit issuance remains heavy in Europe, with E12.4 billion (US$14.2 billion) priced in the last fortnight, according to BNP Paribas. So far there seems to be no sign of volume dropping off before the late-summer lull. That...

European CDO market sustained by infusion of flexible structures.
July 28, 2003... Reports from abroad show that while funded note issuance and unfunded credit default swap volume is down, the European CDO market has maintained a strong level of growth. According to Standard & Poor's, continued support of these CDOs is due...

European court decision on VAT treatment of factoring.
July 28, 2003... By Dr. Kurt Dittrich, Linklaters Oppenhoff & Rdler. On 26 June 2003, the European Court of Justice delivered a judgment on the extent to which the Sixth VAT Directive of 17 May 1977 applies to factoring transactions. The ruling was in...

Wood-pulp producer Aracruz makes clearing in dense patch.
July 28, 2003... Adding yet more grist to the Latin American mill, Aracruz Celulose roadshowed a 144A/Reg S private placement last week via Citigroup. The Brazilian wood-pulp producer is out with a seven-year legal final deal for up to US$400 million through...

Mexico: A tale of two sectors.
July 28, 2003... The reigning couple of Mexican securitizations - the subnational and housing finance sectors - have dropped two new deals into the pipeline. On the housing side, Hipotecaria Nacional (HN) has a Ps960 million (US$91 million) seven-year legal...