CDOs/CLOs

Citing a "new paradigm" of subprime credit losses, Standard & Poor's last week stepped up its RMBS credit surveillance and simultaneously placed a negative CreditWatch on ratings of 18 subordinate classes from 11 RMBS deals issued in 2006 - both in the subprime and Alt-A sectors. According to S&P, the new rating methodology only affects how soon a deal is placed on rating CreditWatch negative. Previously, the rating agency would not place a deal on rating CreditWatch negative if there had not been a loss to the pool.

Several factors have kept annual student loan ABS issuance in the healthy area of $44 billion for the last few years, including government guarantees that act as enticing forms of credit enhancement for much of the sector's underlying collateral.

Hoping to capitalize on the various structured finance growth opportunities beyond securitization, seven ABS senior executives have left BMO Capital Markets to launch Six Degrees Capital Management (SDCM).

With the blessing of a triple-A rating from Moody's Investors Service, hedge fund Aladdin Capital Management became the proud parent of the newest credit derivative product company on the block. The road to obtaining a CDPC rating is a long, drawn out process, sources said - but demand certainly seems strong enough to obtain one.

Last week Federal Reserve Chairman Ben Bernanke managed to say something that both the stock market and the Treasurys market wanted to hear. There would be no pressing need to cut the target funds rate to spur economic expansion, and inflation was not yet out of hand.

In response to the inherent complexities of CRE CDO loans, Standard & Poor's released a report last week detailing how it evaluates companies who act as servicers and special servicers in this growing market segment. The report outlines the different servicing roles for CRE CDO transactions and the rating agency's method for evaluating each of them based on their specific responsibilities.

Lawmakers in the House recently proposed legislation designed to stop unethical practices that private student loan lenders sometimes undertake to gain preferred lender status with universities.

Last week, the American Securitization Forum filed a comment letter with the staff of the State of New York Banking Department regarding New York sales finance licenses, requesting that the department clarify the status under New York Banking Law Article 11-B of parties that acquire retail installment contracts in the secondary market.

Los Angeles-based asset management firm Trust Company of the West - the world's largest CDO manager - is preparing to become a classroom of sorts. In the coming months, TCW will open its doors to a group of Chinese investors interested in learning about CDO management so that they can emulate it. The arrangement will prove beneficial to TCW because the CDO manager, along with a growing number of U.S. CDO market participants, are touting the introduction of CDO technology to Asia's rapidly growing economies as one of this year's largest developments.

The newest spin on the ABX index, the ABX tranche indices (TABX), debuted in the market on Valentine's Day, bringing with it hopes of a benchmark for CDO pricing.