CDOs/CLOs

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Morgan Stanley 21,516.4 1 11.0 22 Lehman Brothers 20,105.2 2 10.2 47 Credit Suisse 19,161.9 3 9.8 39 Countrywide Securities Corp 15,001.3 4 7.6 17 Deutsche Bank AG 13,951.3 5 7.1 25 Bear Stearns & Co Inc 12,692.0 6 6.5 34 Royal Bank of Scotland Group 12,487.1 7 6.4 18 JP Morgan 12,301.5 8 6.3 26 Merrill Lynch & Co Inc 11,781.7 9 6.0 16 Citigroup 10,769.8 10 5.5 27 Industry Total 196,455.6 - 100.0 374 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 4,793.6 1 20.1 7 Deutsche Bank AG 3,323.8 2 13.9 4 Banc of America Securities LLC 2,550.5 3 10.7 4 Credit Suisse 2,466.6 4 10.4 4 Merrill Lynch & Co Inc 2,301.0 5 9.7 2 Goldman Sachs & Co 1,803.8 6 7.6 2 Morgan Stanley 1,537.4 7 6.5 2 Lehman Brothers 1,284.7 8 5.4 1 UBS 998.7 9 4.2 2 JP Morgan 769.3 10 3.2 1 Industry Total 23,840.7 - 100.0 17 Source: Thomson Financial

auto ABS 9% credit card ABS 9% enterprise finance 0% equipment ABS 1% real estate ABS 71% structured settlements 1% student loan ABS 9% trade receivables 1%

What is being called a complete misunderstanding by a district court judge of a credit derivatives contract is causing some to question the clarity of credit default swap documentation. The Southern District Court of New York in February ruled that the French bank Societe Generale, as a protection seller in a CDS transaction, should pay the buyer and plaintiff Aon Financial Products, a division of Aon Corp., $10.1 million despite its failure to deliver bonds to SG. According to industry professionals, the decision was based on an entirely separate derivatives contract and viewed SG as more of a guarantor than a CDS party. SG filed an appeal to the decision in March, and oral argument is expected to begin in late August or September.

In another sign of a booming CDO market, a handful of credit derivative product companies (DPCs) are cropping up and offering credit enhancement products similar to those offered by monoline bond insurers.

LOS ANGELES - Despite the phenomenal surge in asset-backed securities credit derivative issuance, some West Coast market participants say they are wary to jump into either the single name or index markets until the sector can offer more stability. While some are choosing to dip a foot in, others are staying out completely.

LOS ANGELES - As industry representatives work to form a standardized framework for trading credit default swaps that reference CDOs, perhaps the biggest roadblock to completion is how to handle the write-down provision of the swaps. A CDO is not immediately written down following a credit event, making it difficult for parties betting on the deal's performance to either collect or make payments in a timely matter, said speakers at the Asset Securitization Forum's Sunset Seminar held here last week.

Despite damp and gloomy weather for much of last week, the ABS market appeared to get ready for the official start of summer. Issuance picked up the pace last week, with $11 billion in offerings at press time.

Fitch Ratings last week released for comment new interest rates stress criteria for structured finance transactions involving USD Libor. The key difference between the proposed methodology and the way Fitch currently applies interest rate stress criteria to ratings is a switch from historical data to the use of forward-looking swap market data - an information source widely employed across the structured finance market.

After resolving a few accounting issues, including the costs of utility poles, the Florida Public Service Commission gave the go ahead for Florida Power & Light to finance its costs of storm recovery from 2004 to 2005 through a securitization of about $700 million, after estimating that storm recovery costs reached $1.13 billion.