In the wake of the announcement of the Lehman Brothers bankruptcy, ABS market participants are examining its effect on the industry.
Specifically, Moody's Investors Service this morning said that it is "presently assessing the impact of Lehman's bankruptcy and rating downgrade on all structured finance transactions that have exposure to Lehman entities."
Moody's stated that Lehman entities offered credit and/or liquidity support to structured finance transactions in various roles such as a counterparty under derivatives contracts, liquidity provider, repo counterparty,tenant, guarantor, and expense provider in multi-issuers.
These and other structured finance transactions might be exposed to operational and/or credit risk via one or more roles including servicer or back-up servicer, sponsor, cash manager, custodian, paying agent, remarketing agent, calculation agent and collateral manager.
Aside from this, Moody's said that structured finance deals might be exposed to Lehman since they held debt instruments issued by Lehman entities or where Lehman is named as a reference entity under CDS.
The asset classes and issuers most likely to be affected by exposures to Lehman entities include ABS, RMBS, CMBS, ABCP; CDOs,repackaged securities,CFOs, leveraged super senior obligations, derivative product companies, and constant proportion debt obligations.
In terms of its ABS activity, Lehman has not been as active as it has been in the past when it was higher up in the ABS manager league tables. As recently as yearend 2006, Lehman was no. 2 in terms of public ABS manager rankings, according to Thomson Reuters.
By contrast, in 1H08, the firm placed ninth in the ASR Scorecard database's public ABS manager rankings with $3.9 billion worth of business sold. This is an improvement in terms of rank from the same period last year where it placed 12. However, the volume of Lehman's public ABS business dramatically decreased compared with1H07, when Lehman had $22.5 billion in issuance .
Aside from not being as active in ABS, the firm's securitization business has had its share of departures as well. In March, for instance, ASR reported that Nelson Soares, a longtime managing director at Lehman Brothers who led its U.S. securitization group left the company.
Soares was also active with the American Securitization Forum (ASF) and was elected treasurer in a term that expires in 2010. In conjunction with his departure from Lehman, Soares resigned from his position as ASF treasurer.