CDOs/CLOs

Commercial loan provider CapitalSource has priced its most flexible ABS transaction to date, a $1.5 billion revolving cash flow CLO.

Maxim Group is preparing to bring its first CDO to the market following the departure several months ago of its CDO group head Wing Chau. Maxim shelved its CDO group, Maxim Advisory, after Chau and several key staff members left. Now, under the name Maxim Capital Management, and with former Bear Stearns managing director Doug Jones at its head as president and chief investment officer, the team is preparing to emerge again as a regular CDO manager.

Far from going quietly into the night, the third quarter of the ABS market came to a close with a final week that saw slightly wider HEL spreads and the absence of Fitch Ratings from a stream of home equity loan ABS deals.

Driven by investor demand and the availability of new structures, commercial real estate CDO issuance has reached nearly $30 billion so far this year, compared to only $14.5 billion in 2005 and $6.4 billion in 2004. While the sector has continued to perform well, Fitch Ratings last week warned that the pace of upgrades it has been enjoying is not likely to continue.

Still on a roll in the world of CLO issuance, private equity firm The Carlyle Group announced the close of its ninth U.S. high yield fund last week Carlyle High Yield Partners IX (CHYP IX).

Perils associated with natural disasters have become more intense since 1997. Just as the insurance-linked securities sector has adjusted to these changes by developing new structures to absorb risks associated with such events as winter/ice storms, floods and tornadoes, Moody's Investors Service recently unveiled its expanded approach to rating the bonds.

CLO and leveraged loan spreads are expected to remain at or near tights as credit fundamentals in the corporate sector remain robust against a backdrop of deterioration within the U.S. housing market, Bear Stearns analysts wrote last week.

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JP Morgan 10,300.2 1 17.0 20 Citigroup 8,956.9 2 14.8 14 Wachovia Corp 6,815.8 3 11.2 13 Barclays Capital 6,739.9 4 11.1 11 Deutsche Bank AG 5,395.6 5 8.9 12 Banc of America Securities LLC 4,248.3 6 7.0 8 Royal Bank of Scotland Group 4,019.0 7 6.6 8 Credit Suisse 3,466.3 8 5.7 7 HSBC Holdings PLC 2,389.3 9 3.9 3 Merrill Lynch & Co Inc 1,847.5 10 3.0 4 Industry Total 60,676.6 - 100.0 68 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 & Co Inc 29,596.9 1 13.7 43 Citigroup 24,322.6 2 11.3 41 Deutsche Bank AG 21,033.2 3 9.7 28 Wachovia Corp 14,789.8 4 6.8 36 Banc of America Securities LLC 14,124.0 5 6.5 30 Credit Suisse 13,572.0 6 6.3 21 Bear Stearns & Co Inc 12,863.1 7 6.0 25 Groupe Caisses d'Epargne 11,424.1 8 5.3 14 Morgan Stanley 11,341.8 9 5.3 38 UBS 10,786.1 10 5.0 46 Industry Total 215,988.7 - 100.0 399 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 15,645.6 1 29.4 22 Citigroup 9,982.0 2 18.8 15 JP Morgan 9,674.7 3 18.2 21 Morgan Stanley 3,529.0 4 6.6 4 Deutsche Bank AG 3,424.9 5 6.4 10 Barclays Capital 3,096.8 6 5.8 7 Credit Suisse 2,285.0 7 4.3 10 HSBC Holdings PLC 1,999.9 8 3.8 2 ABN AMRO 1,000.0 9* 1.9 5 Merrill Lynch & Co Inc 1,000.0 9* 1.9 4 Industry Total 53,197.4 - 100.0 78 Source: Thomson Financial