CDOs/CLOs

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JP Morgan 5,974.7 1 30.7 11 Citigroup 4,447.1 2 22.9 8 Banc of America Securities LLC 3,723.3 3 19.1 6 Deutsche Bank AG 1,850.0 4 9.5 5 Morgan Stanley 1,829.0 5 9.4 2 Credit Suisse 625.0 6 3.2 2 Barclays Capital 500.0 7 2.6 1 Lehman Brothers 250.0 8 1.3 1 Wachovia Corp 249.9 9 1.3 1 Industry Total 19,449.0 - 100.0 29 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 Credit Suisse 14,881.2 1 12.3 28 Morgan Stanley 13,244.8 2 10.9 17 Lehman Brothers 12,605.6 3 10.4 27 Deutsche Bank AG 9,914.1 4 8.2 16 Citigroup 9,339.0 5 7.7 22 JP Morgan 9,275.4 6 7.6 14 Merrill Lynch & Co Inc 8,840.2 7 7.3 12 Royal Bank of Scotland Group 6,717.5 8 5.5 11 Barclays Capital 6,061.1 9 5.0 13 Bear Stearns & Co Inc 5,411.1 10 4.5 17 Industry Total 121,414.0 - 100.0 199 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 2,915.8 1 20.9 4 Deutsche Bank AG 2,053.0 2 14.7 2 Banc of America Securities LLC 2,027.7 3 14.5 3 Merrill Lynch & Co Inc 1,553.0 4 11.1 1 Lehman Brothers 1,284.7 5 9.2 1 Goldman Sachs & Co 1,255.5 6 9.0 1 Credit Suisse 950.4 7 6.8 2 UBS 450.4 8 3.2 1 SunTrust Banks 382.5 9 2.7 1 Industry Total 13,978.9 - 100.0 10 Source: Thomson Financial

auto ABS 9% credit card ABS 9% enterprise finance 0% equipment ABS 1% real estate ABS 75% structured settlements 0% student loan ABS 6% trade receivables 0%

The bankruptcy filing of troubled auto parts supplier Delphi Corp. late last year is known as the largest corporate credit event to rattle the credit default swap market to date - with more than $20 billion in total notional exposure. That makes the way in which the Delphi-linked CDS trades were settled a lesson for future evaluation procedures for a number of market participants. And while the $12 trillion - and growing - credit default swap market is expected to require a heavier reliance on an optional International Swaps and Derivatives Association's method for settling CDS index trades, events such as the Delphi bankruptcy last year illustrated that substantial price differences exist between bonds valued using the protocol and those using other settlement methods, primarily because prices were determined under the index protocol method some 40 days sooner on average.

ABS and MBS servicers - particularly those that use derivatives to hedge against fluctuations in the fair value of the assets that they oversee - had another cause to raise a pint on St. Patrick's Day, after the Financial Accounting Standards Board (FASB) issued guidelines that simplified the accounting for servicing assets and liabilities for most MBS deals.

Though still a drop in the bucket relative to the overall CDO market, interest in commercial real estate-backed deals has picked up to the point that mezzanine lenders are now getting into the act. RAIT Investment Trust, a mortgage REIT formed in 1998 that specializes in small mezzanine loans, plans to issue its first CDO sometime next quarter. Should that go well, it aims to issue another before the end of the year.

The ABS market got off to a robust start last week, as issuers posted $5.3 billion in deals on Monday. There was good news and bad news coming from the subprime residential mortgage sector. One-month prepayments of fixed- and adjustable-rate subprime RMBS declined across most vintages in February, according to Michael Youngblood, managing director of ABS research at Friedman Billings Ramsey, a trend that is expected to continue through March. At the same time, however, default rates also rose across most vintages.

Merrill Lynch, along with Pierce, Fenner & Smith, will bring to the market this week yet another in a string of CDOs that incorporate both funded and unfunded assets and liabilities. The $1.5 billion Bernoulli High Grade CDO I will be the first CDO managed by Babcock & Brown Securities, a subsidiary of Sydney, Australia-based investment firm Babcock & Brown.

Cigarette sales reached an historic 55-year low in the U.S., according to a survey by the National Association of Attorneys General (NAAG) that came out earlier this month. Cigarette companies are also complaining about other pressures that threaten their businesses. However, the negative headlines should not be a near-term problem for tobacco securitizations that have continued to come to market this year after a yearlong absence, according to Fitch Ratings.