CDOs/CLOs

Overseas investors are increasingly providing funding for senior settlement securitizations backed by pools originated in the U.S., where issuers have had a hard time lining up financing.

At just shy of $3.5 billion, volume in equipment ABS is notably behind where it was at this time last year. Recent events, including the DVI Inc. debacle and the acquisition of several programmatic issuers, could put downward pressure on issuance for the year.

Moody's Investors Service announced that it has modified its approach for rating synthetic collateralized debt obligations, moving to Monte Carlo simulation-based models from binomial approaches. In many circles, particularly Europe, the change is a significant one.

CDO pricing can't get much better. Last week, Carlyle Investment Management was able to bring its high yield loan- backed 7.85-year triple-As at 37 basis points over three-month Libor. Carlyle High Yield Partners VI, which was led by Wachovia Securities, had been in the pipeline since last fall, when guidance for the senior class was 48 over Libor. Talk was revised in recent weeks to the 37 area, and the deal made good (see triple-A pricing chart, p. 11).

Although the potential rise in interest rates has placed a damper on most asset classes, the syndicated loans world has not lost its appeal. Instead, loans have probably been one of the most attractive asset classes around this year, and they are spurring the creation of new loan funds as well as collateralized loan obligations (CLOs).

Year to date as of 06/03 Term (days) 05/28 05/31 06/01 06/02 06/03 1-week

2004 2003 2002 ABS (Public and 144A) 300,601 236,966 187,194 ABS (Public and 144A excluding CDOs) 274,756 220,106 166,280 ABS (Public Only) 238,275 194,348 151,426 ABS (144A Only) 62,326 42,618 35,768 Non-Agency MBS 119,084 142,144 85,530 Agency MBS 158,416 318,315 192,619 CMBS 29,966 29,451 17,643 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 5,974.8 1 21.4 7 JP Morgan 4,588.9 2 16.4 7 Deutsche Bank AG 4,467.4 3 16.0 8 Banc of America Securities LLC 3,105.2 4 11.1 6 Credit Suisse First Boston 1,927.0 5 6.9 5 Merrill Lynch & Co Inc 1,265.0 6 4.5 2 Goldman Sachs & Co 1,256.2 7 4.5 1 Barclays Capital 1,162.0 8 4.2 4 Lehman Brothers 870.7 9 3.1 2 Morgan Stanley 820.1 10 2.9 2 Industry Total 27,953.6 - 100.0 31 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 Merrill Lynch & Co Inc 4,395.8 1 17.0 8 UBS 3,517.0 2 13.6 5 Wachovia Corp 2,882.6 3 11.2 11 Deutsche Bank AG 1,968.7 4 7.6 5 Credit Suisse First Boston 1,772.4 5 6.9 4 Bear Stearns & Co Inc 1,549.8 6 6.0 5 Citigroup 1,457.7 7 5.6 8 Banc of America Securities LLC 1,215.9 8 4.7 7 Royal Bank of Scotland Group 1,005.8 9 3.9 3 BNP Paribas SA 919.5 10 3.6 1 Industry Total 25,844.8 - 100.0 70 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 JP Morgan 5,025.0 1 23.3 7 Citigroup 4,648.4 2 21.5 10 BANK ONE Corp 3,350.0 3 15.5 5 Lehman Brothers 2,324.4 4 10.8 6 Barclays Capital 2,049.4 5 9.5 4 Deutsche Bank AG 1,024.7 6 4.7 4 Banc of America Securities LLC 818.0 7 3.8 4 Merrill Lynch & Co Inc 752.2 8 3.5 2 Credit Suisse First Boston 718.0 9 3.3 3 Goldman Sachs & Co 425.0 10 2.0 2 Industry Total 21,610.1 - 100.0 36 Source: Thomson Financial