Miscellaneous
First Union Securities is prepping two shipping container deals to be placed in the term market. According to a source, one of the deals had been scheduled for Sept. 11, and has been postponed until the underwriter is comfortable with market conditions. Both deals could price this year.
Following the Sept. 1 closing of the merger agreement between First Union and Wachovia, starting this Monday the new entity's underwriting unit will be known as Wachovia Securities, according to the company. The company's syndicate personnel will remain the same.
People
XL Capital Assurance has hired Deborah Murnin as a vice president in the consumer asset-backed finance group reporting to Peggy Wallace. Murnin worked at Chase Securities for the last eight years, most recently part of the firm's Global Securitized Finance Group.
MBS analyst David Zhai recently left Moody's Investors Service, where he was a senior analyst reporting to managing director Andy Silver. Zhai specialized in reverse-mortgage securitization and wrote several reports on the subject.
Dan Smith, a senior leveraged loan portfolio manager at Credit Agricole Indosuez, has jumped to Royal Bank of Canada to build up the Canadian bank's collateralized loan obligation business, according to a senior European CDO investor. RBC could not be reached for comment.
TD Securities (USA) Inc. plans to expand its CDO practice and is looking for at least one senior CDO structurer, according to IFR Asset Backed Securities. TD is presently pressing ahead with on the equity of a $300 million arbitrage cashflow bank loan CDO, HarborView IV, that has a 10% bucket for high-yield bonds.
CDOs
A $7 million to $8 million piece of 1999 vintage emerging market CDO equity from Mass Mutual Global CBO I, Class B junior notes are for sale with a 29-30% yield-to-maturity, European investors told IFR Asset-Backed Securities last week. Additionally, a $700,000 equity piece of a CSAM EM Sovereign CBO I is in the market. The bonds are from the Class-P2 junior notes, which are principle protected by U.S. Treasurys. The offering level is said to be in the very low 20% yield-to-maturity area, investors said.
One equity investor said that legacy CDO positions will continue to cheapen going toward year-end due to dealer balance sheet concerns.
Sources told IFR Asset-Backed Securities that a piece of Balboa CDO I Ltd, an arbitrage cashflow investment-grade average CBO from Pacific Investment Management Co., recently traded at +60 basis points over Libor. Balboa priced at +41 via Lehman earlier this year. The wide level was a result of Balboa having been put on Standard & Poor's list of deals under scrutiny (but not technically on watch) due to more than 3% exposure to the airlines, or more than 8% exposure to airline and lodging. However, Balboa's ratings were just confirmed by Standard & Poor's.
Ratings
After another miserable month, Standard & Poor's has lowered Argentina's sovereign rating to triple-C-plus from single-B-minus and the outlook remains negative. The downgrade reflects the increasingly severe economic and social challenges Argentina faces in balancing its federal budget. Low tax revenues for September and the likely need for $900 million in additional spending cuts highlight the challenges ahead for the Argentine government in implementing its fiscal program.
Following the sovereign downgrade, S&P lowered nine Argentine structured transactions. Additionally, the counterparty credit ratings on several Argentine banks were also lowered to triple-C-plus/single-C. The outlooks on the financial institutions' also remain negative.
Fitch, has assigned an A-minus rating to the $650 million bond issuance from the Republic of Chile. The rating outlook is stable. The rating reflects the country's net public external creditor position, its moderate and favorably structured external debt burden, and the government's longstanding commitment to macroeconomic policy discipline and structural reform.
As part of its rating harmonization effort after acquiring Canadian Bond Rating Service (CBRS), Standard and Poor's last Wednesday withdrew the ratings assigned by CBRS to a number of Canadian ABCP programs.
According to the S&P release, the CBRS-rated programs have liquidity facilities with "an availability clause common to the Canadian market." However, the release said that an S&P commercial paper rating would require liquidity features that would allow investors to be repaid on a timely basis with a level of certainty that is equal to the S&P rating.
S&P further said that as currently structured, these commercial programs do not conform to the rating agency's ABCP criteria. The analysts emphasized that this does not reflect the asset quality of the programs.
Meanwhile, experts say that the lack of timely availability of liquidity will most likely be solved by provisions in the new Basle accord. Under the new rules, banks have to hold capital associated with their ABCP programs.
Clarification
Last week's Whispers column should have stated that Brazil's Banco Itau S.A. has acquired only a small segment of Lloyd's TSB Group's asset management division.
