Hudson Bay Asset Management LLC, a company known for being an active participant in just about every sector of the market, is preparing itself for the world of intellectual property receivables, a sector including everything from royalties, to trademarks, patents, and license receivables.
The company has not done this yet but is currently working with a well-known issuer of those receivables.
"We'd like to break into that in the next four months," said Stephan Schwanauer, a managing partner of the company.
This is not the only thing that the Hudson Bay has cooking. The company is currently launching Hudson Bay Funding Corp., which will play an important role in entering the ever-so-popular, rapidly growing collateralized debt obligation (CDO) sector, which Schwanauer views as being relatively attractive.
"We would like to get involved with CDOs," said Schwanauer. "By positioning Hudson Bay Funding Corp. as a "rent-a-conduit" for investors who have reached their credit limits for certain types of CDOs we can in effect give them extra capacity for issuers with whom they want to maintain relationships. We'd like to see this happening by the third quarter of 2000."
And it doesn't stop there for Hudson Bay. The company may also be jumping on the Internet bandwagon. Hudson Bay Asset Management is also affiliated with another asset management company called Columbus Circle Asset Management LLC (CCAM), an investor in Internet stocks for the last six years. The relationship with CCAM is one strictly of a corporate nature. Schwanauer also added that CCAM is looking to do receivables securitizations for some of its issuers from Internet-based companies.
"In general, we think that certain Internet receivables companies, including players like NextCard, are intriguing opportunities," said Schwanauer.
Hudson Bay was started in 1997 as a partnership with the issuer Point West Capital Corp., a publicly traded company on that has done a number of securitizations in the past, as well as a large insurance company. The target for the Hudson Bay commercial paper funded vehicle is $2.5 billion overall. In terms of growth this year, the company is expecting approximately $1 billion.
Although Hudson Bay is looking to get into bigger and brighter things in the near future, there are some structures of which it is wary, particularly the subprime auto sector.
"I think that a number of investors are wary of the current economy which seems to be at an all time high in terms of overall credit and consumer debt," explained Schwanauer.
"We feel that subprime autos would be among the sectors to be hit first and hardest," he added.
There are other categories that Schwanauer views as being risky. He mentioned certain types of unsecured consumer loans that the company will stay away from, as well as home-equity loans, although the company reviews potential investments on a case by case basis.
Hudson Bay has not bought into any private placement or Rule 144A transactions in the past since that is not its focus, but Schwanauer explained that it is certainly "open to them."
Although Hudson Bay has a current "wish list" of issuers that they would like to work with in the future, before working with a company it has to meet a list of criteria.
"We're looking for all of the standard qualities of an issuer," said Schwanauer.
"We're looking for strict credit underwriting criteria, solid servicing track record and good historical performance economics."
Schwanauer also shared his assessment of what he thinks will be happening in the ABS market this year, citing collateralized bond obligations and sythethics as examples.
"I think it will be interesting to see what happens to ABS in the current market conditions," he said. "To the extent that the economy can not sustain growth indefinitely and we're in an inverted yield curve environment, we'll see what deals survive in a shake up of the economy. I think that the arbitrages that have been available for CBOs seem to be going away and believe that other types of synthetic structures will take their place in terms of arbitrage opportunities."
For a company that seems to be headed nowhere but up, one wonders what their formula is for such a success rate, as well as what sets them apart from the rest.
"I think part of the reason that we stand out is that we're not affiliated with any one bank," explained Schwanauer.
Hudson Bay is a non-bank sponsored conduit. As a non-bank conduit sponsor, Hudson Bay Asset Management is positioned to provide conduit services to companies who might other wise be competing with bank conduit sponsors or their securitization, said Schwanauer.
"I think we have a good position because of that," he added.