CDOs/CLOs

Las Vegas - The structured investment vehicle (SIV) market came up with several major developments in 2006, including two repeat sponsors that launched new vehicles, and a new type of sponsor, likely the Canadian Teacher's Fund. In the year ahead, expect to see U.S. pension funds take a closer look at participating in the sector, while some managers examine new possibilities for underlying assets, including structured finance paper, said industry professionals at the ASF 2007 in Las Vegas last week.

Although the rumor was running rampant throughout the industry last week, it appears as though Bank of America Corp. is not interested in acquiring or embarking on a joint venture with mortgage giant Countrywide Financial Corp. Analysts noted last week that it's highly unlikely BofA would consider buying a mortgage lender that seeks to finance itself through bank deposits. At most, they said, the bank might consider something along the lines of outsourcing its mortgage processing to Countrywide.

Las Vegas - Cohen & Co. last week announced it had snagged Taro Masuyama, the former head of Asia Pacific and Japan structured credit products at Merrill Lynch, to head up its new asset management business in the Asian-Pacific region, Cohen Asia. During Masuyama's seven-year tenure at Merrill, he oversaw the investment bank's CDO business in the region, which originated both cash and synthetic CDOs backed by Japanese and other Asian assets.

Generally considered a setting to indulge brazen debauchery, Las Vegas last week was the scene for an industry conference that, instead, set down to work.

From the early morning sessions to the wee morning hours, conversations at last week's ASF 2007 conference held in Las Vegas seemed to inevitably turn to subprime mortgages and the fate of ABS CDOs, among other things - such as the Miss America Pageant taking place down the strip.

Las Vegas - Auto lease ABS professionals highlighted several industry trends for the year ahead at the ASF 2007 conference held here last week, including weakened demand for new cars and higher program concentration limits for foreign vehicles. High on the list, however, was the use of floorplan assets in multiseller extendible note (EN)ABCP programs.

Las Vegas - The small, tidy timeshare loan ABS market performed well in 2006, thanks to new product offerings that increased sales. Prospects should be equally good for 2007, said several industry professionals yesterday during a panel reviewing the timeshare sector at the ASF 2007 conference in Las Vegas last week.

Las Vegas - The growing clout of CDO equity funds is leading to so-called activist equity investors, according to market participants at ASF 2007 held here. Investors are asking for lower management fees, or, in some cases, no management fees, as well as higher return guarantees. One CDO recently marketed skipped subordinate management fees altogether, and an increasing number of deals are being structured without interest coverage and overcollateralization triggers.

Las Vegas - Although market participants are still waiting on official word regarding how to implement certain provisions of Regulation AB, Paula Dubberly, Securities and Exchange Commision associate director, gave a good indication of what the SEC stance is on the issue of third-party assessments at last week's ASF 2007.

The following is an exclusive interview with GSC Group's Seth M. Katzenstein, managing director and head of portfolio management and underwriting, U.S. collateralized corporate debt, and Alexander B. Wright, managing director and head of origination, U.S. collateralized corporate debt. GSC recently took time to answer questions on topics including investment strategy, CDO structuring and the market's future potential.