CDOs/CLOs

With the addition of an Ambac wrap, last week's 12b-1 fee securitization from Citibank, N.A. - the sector's only remaining issuer - experienced wider distribution and tighter pricing than any previous mutual fund fee ABS. The $133 million Hedged Mutual Fund Fee Trust series 2004-2 deal, with an eight-year final maturity and 2.8-year average life, priced via Citigroup Global Markets at 25 basis points over one-month Libor - 110 basis points tighter than April's double-A rated senior/subordinated deal.

If you were stranded on a desert island with nothing to do but analyze CLOs, which would you prefer to examine - default risk or prepayment data?

At last week's meeting, the Financial Accounting Standards Board reiterated many previously indicated stances to be incorporated into the second exposure draft of the amendment to FAS 140. In a "surprise move" - described as such in an informal meeting recap from Marty Rosenblatt of Deloitte & Touche - the Board decided that MBS generated by swapping whole loans for GSE-guaranteed mortgages into a QSPE must be accounted for at fair value with gains or losses recognized, Rosenblatt said.

Lehman Brothers priced its first transaction backed by tobacco litigation fees stemming from the Master Settlement Agreement last month. Until now, this sector had been the exclusive province of Deutsche Bank Securities.

The continual search for yield across the credit markets has driven new investor groups into Europe's traditionally clubby and private mezzanine market. Larger deal sizes, increased liquidity and an ever-more active secondary market have all helped tempt private equity funds, institutional investors and, inevitably, hedge funds into the mezzanine market this year. But for some, notably the large mezzanine players, the entry of new groups into the asset class threatens the safety of the asset class and some say could lead to losses further down the line.

Thomson Financial plans to unveil six new CDO league tables this month. They include the following:

IP Innovations Financial Services, a guarantor of loans secured by intellectual property, has closed a deal on a $15 million revolving credit facility with Cambridge Display Technology, marking IPI's second transaction.

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

Year to date as of 07/29 Term (days) 07/23 07/26 07/27 07/28 07/29 1-week

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Citigroup 7,692.8 1 18.6 12 JP Morgan 7,574.6 2 18.3 14 Deutsche Bank AG 5,344.5 3 12.9 9 Barclays Capital 3,323.5 4 8.0 8 Wachovia Corp 3,158.9 5 7.6 4 Credit Suisse First Boston 3,120.2 6 7.5 7 Banc of America Securities LLC 3,105.2 7 7.5 6 Merrill Lynch & Co Inc 2,002.4 8 4.8 3 Morgan Stanley 1,920.1 9 4.6 5 Lehman Brothers 1,470.7 10 3.6 3 Industry Total 41,391.1 - 100.0 48 Source: Thomson Financial