Scottsdale, Ariz. - Strategic Research Institute's Asset Securitization 2002 Symposium kicked off seamlessly last week, and remarkably well-attended: the tone being a mix of humor and (not surprisingly) market optimism, despite the industry hurdles that were manifesting themselves back on Wall Street (see story below).
Though perhaps a smaller gathering than the prior week's Information Management Network's schmooze fest, several attendees (on the two-conference stretch) were heard saying that content is a higher priority at SRI, and the panels are less jammed-packed, more intimate, and substantive.
All the same, SRI was still sporting an impressive 1,300-plus turnout. According to conference organizer Rita Karsadi, there was a large contingent of private-equity professionals there to educate themselves on securitization. Were they ever in for a treat; or maybe not, depending on whether or not the PE crowd had the wherewithal to decode securitization humor.
Credit Suisse First Boston group co-head and opening ceremonies moderator Joe Donovan introduced the panelists to the theme of Bonanza, their names rising up on each of the three staticky-yellow theater-sized screens in the conference ballroom at the Fairmont Princess. For example, Chuck Skully, director of structured finance at MetLife, watched his name materialize following the boilerplate Playing the Part of Investor.
Being Arizona, the theme was apparently Wild West, with audio-dubbed scenes from cinematic favorites such as The Three Amigos (the Amigos being the three underwriters on Ford Motor Credit's $5 billion deal in January), Mel Gibson's Maverick, City Slickers, and other classic old westerns.
Apart from initial gags and chuckles, this conference was all but trite. The sessions were well-attended, well-timed, and the panelists seemed less interested in selling their names than in striking up audience response.
Of course troubles associated with Enron Corp. slipped into nearly every session. And as was the case during IMN the week prior, a debate ensued as to whether rating agencies should take action more quickly. Interestingly, investors were actually concerned that the rating agencies, in response to the Enron debacle, could become "trigger happy" to hedge their bets, which could act as a sort of self-fulfilling prophecy for companies that might have a legitimate chance at restructuring. The debt downgrade, essentially, could wipe out access to the capital markets for a company that might have otherwise been on the road to recovery.
"Companies that could right themselves might be forced down," said one investor during IMN's opening ceremonies.
Also at IMN, Daniel Satchel, of State Street Global Advisors, commented, "Why would you possibly think that the appropriate reaction would be to change ratings faster? Why didn't they get this right the first time? Where were [the rating agencies] when these guys were forming these partnerships?"
Alluding to Satchel's comments (which, by the time SRI began, were well known), a panelist at Donovan's session argued that the rating agencies can only be responsible for the information provided to them by the companies.
"Rating agencies aren't detectives," a source commented after the session. "They're not police officers either. Should we expect to look through a company's willful attempt to cover things up?"
As for spreads...
Other issues emerged as well, such as consumer credit and the economic outlook the impact of further credit weakening (or recovery) on spreads.
During a mid-morning research panel, analysts discussed the potential for further tightening in triple-A ABS. Chip Wheeler of Bear Stearns, among others, sees spreads on top-tier triple-A issuers as bottoming out. CSFB's Neil McPherson believes there is value in subprime auto, as the triple-As trade between 17 and 20 basis points behind prime paper. McPherson sees this differential near its widest level, if you view the economy as recovering sharply. CSFB sees unemployment peaking in March.