CDOs/CLOs

While the primary CDO market has been largely guarantor-free for the past several months, behind the scenes the monolines are wrapping new issues in the secondary market shortly after close.

Opinions are divided over the reach of the potential fallout from DamlierChrysler AG's decision to withdraw its $6.4 billion equity stake in Mitsubishi

With the inaugural offering of CARSS 2004-1, Banc of America Securities did in autos what it successfully pioneered in the MBS market - a synthetic default recourse transaction to bifurcate and sell off the risk of a portfolio of consumer loans. As with BofA's Resi Finance LP program, which has issued seven securitizations totaling a nominal $105 billion, the $3.89 billion CARSS deal is structured to remove the credit risk of the collateral backing the single-A through single-B rated classes, retaining the high investment-grade risk.

To minimal fanfare, the second-ever bank-owned life insurance (BOLI) broker-commission backed ABS recently closed. Called A&K Funding series 2004-1, the deal totaled $60 million and was led by sole underwriter Credit Suisse First Boston, closing in the first quarter as a negotiated private placement.

The improving economy has cast a ray of sunshine among Fitch Ratings analysts, who were generally optimistic throughout the firm's quarterly outlook conference call last week. Stronger growth prospects, Fitch said, will contribute to a spike in senior/sub structures for non-prime lenders throughout the year, as the debt tracker has been approached by issuers and bankers interested in bringing unwrapped ABS.

Moody's Investors Service found the number of downgrades of asset-backed securities rated by the agency decreased 50% in the first quarter of 2004 compared to the prior quarter, according to its soon-to-be released quarterly update. The data is encouraging, backing up mainstream commentary that the economy and the capital markets have indeed turned a pivotal corner.

At last week's meeting on disclosure and reporting practices for securitizations, the Securities and Exchange Commission voted unanimously to publish a proposal for comment, which it plans to release this week. The comment period should run for 60 days after the proposal debuts.

Year to date as of 04/29 Term (days) 04/23 04/26 04/27 04/28 04/29 1-week

2004 2003 2002 ABS (Public and 144A) 230,575 179,615 137,880 ABS (Public and 144A excluding CDOs) 204,013 169,080 123,988 ABS (Public Only) 182,085 149,083 111,994 ABS (144A Only) 48,490 30,532 25,886 Non-Agency MBS 78,496 105,908 65,544 Agency MBS 109,950 265,118 166,908 CMBS 24,830 20,419 14,492 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 4,497.4 1 22.1 6 Deutsche Bank AG 4,467.4 2 21.9 8 JP Morgan 3,844.4 3 18.9 6 Credit Suisse First Boston 1,427.0 4 7.0 4 Banc of America Securities LLC 1,263.5 5 6.2 2 Goldman Sachs & Co 1,256.2 6 6.2 1 Barclays Capital 1,162.0 7 5.7 4 Merrill Lynch & Co Inc 815.0 8 4.0 1 Banc One Capital Markets 675.0 9 3.3 2 Lehman Brothers 408.0 10 2.0 1 Industry Total 20,398.9 - 100.0 22 Source: Thomson Financial