CDOs/CLOs

Strictly speaking, the U.S. ABS market did not have a lot to celebrate last week. According to JPMorgan Securities's tally, year-to-date issuance amounted to $290 billion, roughly flat compared to last year. The bank also pointed to weakening fundamentals ahead for the subprime housing market, on top of an expected slowdown because of the threat of inflation.

Along with the rapid growth of CMOs and ABS came a number of processing challenges and often late and inaccurate notifications related to these transactions. In an effort amend this situation, The Depository Trust & Clearing Corp. (DTCC) has proposed a series of new initiatives aimed at solving the processing problems of the structured securities market. These new initiatives were discussed in a new white paper issued on June 8 by DTCC.

The CDO market continues to expand in leaps and bounds, and along with the expected surge in loan-only credit default swaps, one of the latest manifestations of its growth comes in the form of synthetic CLOs that uses total return swaps (TRS). This structure, the TRS CLO, is becoming more popular both with CLO managers as well as with investors, and if the loan market remains as it is today, market players expect the popularity of the TRS CLO to increase further.

With the U.S. hurricane season officially kicking off this month, participants in the esoteric sector of catastrophe bonds find themselves awkwardly in step with the mainstream. As speculation abounds over hurricanes making landfall in the U.S. again this year, all eyes are focused on and the probability for destruction.

Merrill Lynch brought to market last week the $366 million Emporia Preferred Funding II - a collateralized loan obligation managed by Cohen Brothers subsidiary Emporia Capital Management and backed primarily by middle-market loans.

Campus Partners, of Rockville, Md., one of the largest servicers of student loans in the U.S., is getting into the private student lending business, after it received an infusion of equity financing from AIG United Guaranty. After its initial launch this fall, Campus Partners will eventually issue ABS to help finance the lending business.

Deutsche Bank Securities announced last week that it has entered into a joint venture with Pinnacle Financial Corp. to form Pinnacle Commercial Mortgage, which is a Florida-based originator of Alt-A small-balance multifamily, commercial and mixed-use mortgage loans. Financial terms of the agreement were not disclosed.

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Citigroup 6,327.6 1 21.0 13 JP Morgan 4,628.5 2 15.4 11 Wachovia Corp 3,139.5 3 10.4 7 Deutsche Bank AG 2,602.6 4 8.7 8 Royal Bank of Scotland Group 2,169.3 5 7.2 5 Merrill Lynch & Co Inc 1,847.5 6 6.1 4 Barclays Capital 1,705.7 7 5.7 4 Banc of America Securities LLC 1,682.4 8 5.6 2 Credit Suisse 1,550.0 9 5.2 3 Morgan Stanley 982.4 10 3.3 2 Industry Total 30,071.2 - 100.0 38 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 13,852.8 1 15.3 23 Merrill Lynch & Co Inc 12,695.7 2 14.0 18 Banc of America Securities LLC 8,538.7 3 9.4 21 Deutsche Bank AG 6,810.1 4 7.5 11 UBS 5,654.0 5 6.2 16 Credit Suisse 5,617.9 6 6.2 10 Bear Stearns & Co Inc 5,211.1 7 5.8 11 Morgan Stanley 4,165.0 8 4.6 16 Lehman Brothers 4,042.3 9 4.5 7 Royal Bank of Scotland Group 3,245.9 10 3.6 6 Industry Total 90,691.9 - 100.0 178 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 8,982.0 1 26.7 13 Banc of America Securities LLC 7,939.0 2 23.6 12 JP Morgan 7,403.7 3 22.0 15 Deutsche Bank AG 2,549.9 4 7.6 7 Morgan Stanley 1,829.0 5 5.4 2 Barclays Capital 1,209.0 6 3.6 4 HSBC Holdings PLC 1,000.0 7 3.0 1 Credit Suisse 875.0 8 2.6 3 ABN AMRO 500.0 9 1.5 1 Lehman Brothers 425.0 10 1.3 2 Industry Total 33,695.5 - 100.0 49 Source: Thomson Financial