The 40 bond executives from Credit Suisse First Boston who were going to work for Barclays Capital were lured back to CSFB with offers of a compensation package that topped Barclays' offer. Among those leaving were John Walsh, global head of investment grade capital markets; Jack Dimaio, chief of developed-markets credit; Donald Devine, head of U.S. debt syndication; and Mark Landis, head of investment-grade bond sales. Others were sales executives, traders and executives from the firm's commercial mortgage-backed securities group, including Ben Aitkenhead, Mark Finerman and Mike Marriott. The planned exodus hit CSFB's CDO group as well, including Managing Directors John Cristal and Tom Pascal. Also, CDO trader Khris Khraus had planned to defect with banker Devon Patal and salesperson Bruce Steinberg.
Robert Diamond, Barclays' chief executive, told employees in an internal memo that the firm had lost interest with the group when it became apparent that the executives were seeking counter-offers from CSFB, which was considered by Barclays to be a breach of what was previously agreed upon. Alan Wheat, CSFB's chief executive, reportedly pulled out all stops to keep the group and finally offered a pay boost to the entire fixed-income group, not only those leaving.
Kathy Moon will join Financial Security Assurance, starting March 12, as a member of CDO group. Moon moves over from Fitch, where she had been for five years, specializing in CDOs since 1999, and asset-backed securities prior.
Lucent Technologies is said to be looking at the asset-backed market in an effort to raise cash and reduce its vendor finance exposure, sources say. The company would do a traditional securitization of its vendor finance loans. Lucent has come under pressure recently to refinance $6.5 billion of debt as ratings agencies have slashed its credit ratings. Moody's Investors Service cut Lucent's ratings for the second time in about a month, lowering the company's senior unsecured debt rating two notches to Baa3 and commercial paper rating to P3 from P2. S&P cut its equivalent ratings to BBB- and A3. Both agencies have Lucent on watch for further downgrades. The ratings downgrades effectively shut Lucent out of the commercial paper market, and the company will be forced to wind down its $1.1 billion ABCP conduit, which was established last year.
The ACLI reported that fourth quarter commercial mortgage delinquencies rose just 1bp from the third quarter, to 0.28%. Year over year, delinquencies gained a modest 3bps. Loans in the process of foreclosure fell 2bps from last quarter to 0.15%, but rose 6bps year over year. Total foreclosures, however, stood at 0.22%, down from 0.30% in 1999, and the lowest level since 1984.
Freddie Mac announced two new product enhancements that will reduce the cost of financing multifamily properties. Borrowers who choose either a FHLMC Multifamily Adjustable Rate Mortgage or the FHLMC Multifamily Revolving Credit Facility can base their rate on a FHLMC Reference Bill. The GSE said that in addition to lowering financing costs to borrowers, it would bring stability and liquidity to the multifamily market.
In a comment letter to the Office of Federal Housing Enterprise and Oversight (OFHEO), a coalition of large banks and mortgage insurance companies said that FHLMC and FNMA could pose a risk to the nation's financial system. FM Watch, which represents several firms, noted that the two GSE's annual debt issuances are almost equal to that of the U.S. Treasury and if both were to fail, the economy could suffer adverse effects. Countrywide Home Loans differed, saying that the two were a source of strength for the financial system. OFHEO is conducting a study on the risks that the GSEs may pose to the financial system and had requested comments from interested parties. FNMA and FHLMC released their comments last month saying that they didn't pose a risk to the system as they were well managed and financially sound. Further, they said they offered stability as they offered nationwide access to mortgage funds.
Citing Japan's wavering fiscal flexibility and rising debt levels, last week Standard & Poor's lowered its long-term local and foreign currency sovereign ratings on Japan to double-A-plus from triple-A.
Officials at S&P said on Thursday that the rating agency is likely to affirm all outstanding ABS/RMBS/CMBS transactions in Japan despite the sovereign downgrade. However, ABS transactions relaying on credit enhancement from Japanese insurance companies that are impacted by the sovereign downgrade could be subject to rating action.
Already in a fragile state, Argentina faces yet another hurdle that may cause investors to be wary. A U.S. Senate report stated that there have been several incidents in which U.S. banks were used to launder money to corresponding banks, including Argentina's Federal Bank and MA Bank. The report has inflicted a scandal throughout Argentina and last week Pedro Pou, central bank chief, is said to be at risk of losing his job.
March 5-6: New York, NY-The Strategic Research Institute presents the first ever ABS On The Web conference. For more information call 800-599-4950 or visit www.srinstitute.com/ca257.
March 13-14: New York, NY-Information Management Network is presenting 2001: A CDO Event at the Marriott Marquis. For more information, call (212) 768-2800 ext. 1 or visit www.imn.org/a286/f/.
March 26-27: New York, NY-The Strategic Research Institute will hold the fourth annual Asset Backed Commercial Paper Forum at the Grand Hyatt. For more information, call 800-599-4950 or visit www.srinstitute.com.