In the securitized private placement arena, J.P. Morgan & Co. is the top underwriter for 1999, according to rankings by Thomson Financial Securities Data.
J.P. Morgan underwrote $14.46 million worth in private placements, which includes transactions structured according to Rule 144A. With 44 transactions, the firm captured 12.8% of the market share. The No.1 slot is a substantial jump from the company's placing 14th in 1998's rankings.
"Our success is based on the number of initiatives in the collateralized debt obligation area and broader asset-backeds that operate off our strengths, our historic strengths in asset-backeds and commercial mortgage-backeds," said a spokesman from J.P. Morgan.
The spokesman predicts that Morgan's momentum will continue through 2000.
Not only will the flow go on, but also the search for new asset classes. "There is an ongoing effort, not only on our part, but by others to strive to find innovative asset classes, and new ways to securitize existing and future classes," he added.
The future is bright for private placements.
"In general, there continues to be liquidity in the form of investors looking for yield pick up and this is one area they can find it," he said. "The whole sector of re-packaging assets, creating new investment vehicles is also going to continue."
Not far behind J.P. Morgan, Lehman Brothers Inc. placed No. 2 for the second consecutive year. Lehman Brothers, which brought 144 deals to market, fell short of Morgan by just $40 million.
A Look at the Year Behind
Like J.P. Morgan, CDOs topped last year's list. "Overall, the market was dominated by collateralized debt obligations," said an industry source.
"There was more growth in arbitrage CDO last year. Obviously, for managers, it's a good way to access funds to build portfolios," he added.
Certain asset classes moved away from the private arena as well.
"You see less of the consumer assets and more of the corporate- or commercial-type assets in private placement land," the source noted. "I think that's like one big theme."
This trend can be attributed to the fall-out from 1998 and the industry consolidation in the consumer-lending arenas, said the source.
"The larger servicers with access to the public market tend to dominate more than some of the smaller, specialty kind of niche companies," he added. "And as a result of that, some of these asset classes are migrating more toward public markets and away from the private markets."
Ninety-nine also saw a significant dip in industry totals. It went from $125.9 million in 1998 to $112.9 million in 1999. "I think this is subject to kind of market conditions, the status of where the public markets are," said the source.
But there will always be a niche for private placements. "There will always be assets that people are looking to securitize that are not going through the public registration process," he said.
"These assets are going to separate placement shops where people are going to spend time analyzing the transaction. On a whole, I think there's always going to be a viable private placement market in ABS land."