Mizuho Securities USA has several ABS CDOs and CLOs in its pipeline, according to the head of U.S. structured credit, Alexander Rekeda.

The Japanese bank began underwriting CDOs in the U.S. market this year, after Rekeda and 10 members of Calyon SG's U.S. CDO team left to join Mizuho in December 2006.

Mizuho is planning a managed synthetic deal next month to reference investment-grade corporates and is currently marketing a mezzanine ABS CDO. Mizuho is also prepping a high- grade ABS CDO for May. Rekeda said investor demand remains for CDOs, although differentiation by collateral and manager is becoming increasingly pronounced. "The appetite is still there - but in the first quarter the issuance was so big that not all of it was absorbed by the market," Rekeda said.

U.S. CDO issuance boomed in the 1Q07. This was when heavy investor demand gave way to the need for issuers to off load home equity bonds into CDO structures - or deal with selling the securities at a loss. Overall, U.S. CDO volume grew to $92.8 billion in 1Q07, up 39% from the $66.8 billion in deals sold to the market a year earlier. The first quarter saw 146 deals, compared with 138 in the first quarter of 2006, according to Thomson Financial.

Rekeda said the key to successful execution of ABS CDOs in today's market is - first and foremost - staying as far as possible from the 2006 HEL vintage. He also cited moving up in quality to triple-B flats and pluses and avoiding a too-large CDO bucket. From a structural perspective, the size of the super senior is key to execution, he added.

Yuri Chumak, Xavier Capdepon, Gwen Snorteland and Rachel Yang left Calyon, a unit of French bank Credit Agricole, with Rekeda. Former Calyon senior ABS and CDO trader Paolo Torti joined Mizuho as head of structured credit trading as well.

Mizuho also hired Douglas Munson, a former director and salesperson in the company's structured credit sales department, and James Shepard as co-heads of U.S. debt capital markets, a new department for the company. Former Calyon staffers William Budd, Daniel Will and Clifford Condon round out the team, which was set up to distribute new product lines for the bank, including project finance, corporate bonds, 144A and private placements.

All of the employees are named as defendants in a lawsuit brought by their former employer Calyon. The suit alleges that Rekeda's team acted in concert with one another and Mizuho in an "illicit scheme" to leave the company en masse. It also alleges the staff members took proprietary information with them. Calyon is seeking $150 million in compensatory damages and $600 million in punitive damages, according to its complaint. Calyon late last month was awarded a temporary restraining order barring Mizuho staff members from using documents that originated at Calyon.

(c) 2007 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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