CDOs/CLOs

GE Consumer Finance is poised to become a much larger player in the credit card sector, as it pockets the receivables of two U.S. retailers and stakes out more business overseas, following last week's announced plans to gobble up the credit card arm of Dillard's Inc., the sixth-largest in-house card program in the U.S., for about $1.25 billion. This amount includes $400 million of securitization.

Greenwich Capital entered the ABS primary market last month with a $300 million security backed by originations from Centex Corp. - the first time the Dallas-based home builder has made up the entirety of a principal finance shelf - and it hardly went unnoticed.

Last week marked another slow session in the U.S. ABS primary market, as August rolled on and the Republican National Convention neared. As of Thursday evening, roughly $4.8 billion in new-issue ABS had priced, while close to $2 billion in mortgage ABS was still making the rounds.

First Tennessee Capital Markets is getting ready to hit the market with its third auto ABS backed by loans originated and serviced by a federal credit union. The transaction is slated to be the largest such deal to date.

While not carrying the shock value of New Jersey Gov. Jim McGreevey's announcement last week, the fact that some CDOs backed by real estate collateral are pricing sans ratings from Moody's Investors Service has opened up a can of worms about CDO- rating methodologies and how those deals have priced. Now comes talk that Fitch Ratings will announce changes to their ratings metodology next month.

Recovery rates on manufactured housing ABS bonds have seemingly reached their nadir; moreover, investors in these bonds should expect recoveries to remain at their current low levels throughout the lives of these transactions, according to analysts at Standard & Poor's.

Manufactured housing lender Origen Financial, back in the ABS primary market in January after a two-year hiatus, has led the shift toward more conservative loan underwriting practices, something that is evident in the underlying collateral pool, Standard & Poor's, analysts said.

By Erkan Erturk, Ph.D., Director, Kelly Luo, Ratings Specialist, Monica Perelmuter, Associate Director, and Mark Risi, Ratings Specialist, Standard & Poor's Ratings Services

Year to date as of 08/23 Term (days) 08/17 08/18 08/19 08/20 08/23 1-week

2004 2003 2002 ABS (Public and 144A) 451,537 320,659 257,996 ABS (Public and 144A excluding CDOs) 413,536 295,871 227,284 ABS (Public Only) 354,526 260,965 202,382 ABS (144A Only) 97,011 59,694 55,613 Non-Agency MBS 186,326 192,568 122,798 Agency MBS 198,032 416,143 290,703 CMBS 48,847 39,147 28,371 Source: Thomson Financial