CDOs/CLOs

While Ownit Mortgage chief executive Bill Dallas reportedly filed for Chapter 11 bankruptcy in order to shelter his employees, buyers of the subprime lender's mortgage-backed bonds that want compensation for poorly performing loans appear as though they will get the short end of the stick. Nearly all of the company's unsecured creditors are investors holding Ownit loans they say need to be repurchased for one reason or another, but it's unlikely the companies will see much compensation from Ownit, according to sources familiar with the matter.

With CLO managers ramping up funds in record numbers, investors have been scrambling to cash in on the diverse investment strategies that make these vehicles a safe choice for yield. However, a recent survey from Fitch Ratings found that these funds may not be as diversified and low risk as their definition would suggest. In fact, CLOs as a whole have been acquiring a high proportion of leveraged loans that are used to fund "shareholder friendly-activities," as well as loans that are light on covenants, and this could mean very unsteady investment platform in the event of a downturn.

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Citigroup 11,324.6 1 13.3 20 JP Morgan 11,150.3 2 13.1 23 Wachovia Corp 10,658.0 3 12.4 18 Barclays Capital 9,681.6 4 11.4 15 Deutsche Bank AG 7,784.8 5 9.2 17 Banc of America Securities LLC 6,637.5 6 7.8 10 Credit Suisse 4,066.8 7 4.8 8 HSBC Holdings PLC 3,971.7 8 4.7 5 Royal Bank of Scotland Group 3,644.0 9 4.3 8 Morgan Stanley 3,554.6 10 4.2 7 Industry Total 85,059.8 - 100.0 90 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Merrill Lynch 50,073.6 1 14.9 65 Citigroup 36,607.6 2 10.9 66 Deutsche Bank AG 30,674.1 3 9.2 63 Wachovia Corp 23,697.9 4 7.1 54 Credit Suisse 22,623.0 5 6.8 34 UBS 22,303.8 6 6.7 65 Bear Stearns & Co Inc 21,557.6 7 6.4 41 Banc of America Securities LLC 20,730.3 8 6.2 52 Morgan Stanley 19,666.3 9 5.9 71 JP Morgan 15,359.1 10 4.6 37 Industry Total 335,048.1 - 100.0 671 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Banc of America Securities LLC 20,720.6 1 30.9 29 Citigroup 11,982.0 2 17.8 18 JP Morgan 11,859.7 3 17.7 25 Deutsche Bank AG 4,624.9 4 6.9 13 Morgan Stanley 4,055.3 5 6.0 5 Barclays Capital 3,373.8 6 5.0 8 HSBC Holdings PLC 2,749.9 7 4.1 3 Credit Suisse 2,285.0 8 3.4 10 Merrill Lynch 1,645.0 9 2.5 6 Wachovia Corp 1,124.9 10 1.8 4 Industry Total 67,148.7 - 100.0 101 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JP Morgan 2,125.0 1 18.4 3 Deutsche Bank AG 1,750.0 2 15.1 3 Banc of America Securities LLC 1,554.5 3 13.4 3 Barclays Capital 1,409.5 4 12.2 2 ABN AMRO 1,250.0 5* 10.8 2 Lehman Brothers 1,250.0 5* 10.8 2 Royal Bank of Scotland Group 1,000.0 7 8.7 2 Merrill Lynch 925.0 8 8.0 2 Citigroup 300.0 9 2.6 1 Industry Total 11,564.0 - 100.0 10 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Lehman Brothers 68,450.3 1 11.0 166 Countrywide Securities Corp 66,904.1 2 10.8 109 Royal Bank of Scotland Group 63,037.2 3 10.2 114 Citigroup 40,622.2 4 6.6 91 Deutsche Bank AG 40,551.2 5 6.5 95 Bear Stearns & Co Inc 38,958.3 6 6.3 98 Credit Suisse 37,228.5 7 6.0 89 Merrill Lynch 37,120.4 8 6.0 55 Morgan Stanley 35,061.6 9 5.7 36 JP Morgan 32,214.8 10 5.2 72 Industry Total 619,892.6 - 100.0 1,133 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Citigroup 14,994.0 1 22.6 15 Deutsche Bank AG 9,079.8 2 13.7 13 Credit Suisse 6,548.1 3 9.9 10 Banc of America Securities LLC 5,301.7 4 8.0 7 Wachovia Corp 4,871.9 5 7.3 4 Morgan Stanley 4,248.4 6 6.4 6 Goldman Sachs & Co 4,150.9 7 6.2 6 Lehman Brothers 3,873.7 8 5.8 3 Merrill Lynch 3,819.9 9 5.8 4 RBC Capital Markets 2,179.0 10 3.3 4 Industry Total 66,469.7 - 100.0 47 Source: Thomson Financial

auto ABS 10% credit card ABS 8% catatrophe bonds 0% enterprise finance 0% equipment ABS 2% real estate ABS 70% structured settlements 0% student loan ABS 8% trade receivables 1% utilities ABS 0%

The U.S. ABS market spent a lot of time in 2006 absorbing major shocks, whether it was sweeping reforms for disclosure under Regulation AB, or changes to the Higher Education Act. Next year, according to several market players, the asset-backed securitization business will deliver a few punches of its own.