CDOs

Sources familiar with Franklin Templeton's ABS CDO via Deutsche Bank have confirmed the deal has been pulled, according IFR Asset-Backed Securities. No specific reason was given, but it is understood that Franklin reviewed the post-Sept. 11 environment and decided for internal reasons that doing its first ABS CDO in the near future is not practical.

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Moody's Investors Service added Valentina Varola to its structured finance group earlier this month. She will work from the Milan office where she will focus on the rating process of Italian and other European ABS deals. She will report to Alain Debuysscher.

XL Capital Assurance (XLCA) has hired Francis Constantinople as a managing director in investor relations, reporting to XLCA's CFO Ed Hubbard. Constantinople was most recently at Royal Bank of Canada Financial Group, where he was vice president/senior transactor, in the North American Asset Securitization Team.

Staffers at Moody's Investors Service have begun moving back into their Church Street building, the rating agency said. Regardless, the analysts will be checking the voicemails on their permanent phone numbers.

Ratings

Fitch downgraded both the Class A and Class B notes of the London International Exhibition Centre plc (ExCel). The Class A secured bonds were downgrade to BB- from BBB and the Class B notes were downgrade to CC from BB. The notes have been on negative watch since June 27 of this year. The motive behind the recent ratings action stems from updated financial forecasts and valuations and a meeting with managers and shareholders. Based on this, the rating agency determined that the profitability from the company's core operations were unpredictable when viewed against the present economic scenario.

Moody's Investors Service will release its first-half transition study this week. In it, the rating agency finds that downgrades outnumbered upgrades four-to-one through June 2001, mostly attributable to CDOs that reference ailing corporate credit. The second largest portion of downgrades came from the home-equity sector, accounting for 21%. However, 23 of the 27 home-equity downgrades were due to poor asset performance from one issuer, various series from GE Capital Mortgage (six transactions).

Interestingly, the only non-asset performance downgrade was a Budget Rent-A-Car transaction, which was nicked due to a corporate downgrade to the servicer.

According to Moody's analyst Joseph Snailer, prior to year 2000, upgrades were pretty much on par with downgrades in the ABS market. It's only been in the last two years that downgrades have so heavily outpaced upgrades.

News

Special purpose company Multichem, which was set up by Brazil's Odebrecht, is set to issue BRL 175 million ($64 million) in five-year debentures through Unibanco. The company is securitizing chemicals sales contracts from Odebrecht with five-year amortizing paper that carry a 12-month grace period. A banker close to the deal said that it would require 45-60 days to close the transaction. Unibanco is inviting other banks to take part in the securitization.

Bahia-based Odebrecht is a holding company that deals with pulp, construction and engineering, chemical, infrastructure and public services assets.

Moody's Investors Service withdrew its prospective rating of Baa3 for the $72 million Credit-Linked Notes "CLN Fidex". The notes were expected to be issued by BNP Paribas. Moody's withdrew the rating because BNP will no longer be issuing the said notes.

Standard & Poor's released last week a new partial guarantee model, which is an extension of its multiple-credit-dependent obligations (MCDO) criteria. This new model will allow emerging market issuers to get investment grade ratings on their structured financings. Because of the model, issuers will not need to provide 100% credit enhancement to allow them to get a rating that exceeds a firm's issuer credit rating.

In light of trends in the risk profiles of Portuguese bank Banco Espirito Santo S.A. (BES) and its controlling Luxembourg-based holding company, Espirito Santo Financial Group S.A. (ESFG), Standard & Poor's has lowered all its ratings on BES and related entities, including the long- and short-term counterparty credit ratings on BES to single-'A'-minus and A-2' from single-'A' and A-1', respectively. The outlook on BES is stable.

The rating agency also lowered by one notch its long-term ratings on ESFG and related entity ESFG Overseas Ltd., including the long-term counterparty credit rating on ESFG to triple-'B'-plus from single-'A'-minus. The outlook is currently negative. The A-2' short-term ratings on ESFG were affirmed.

Along with these rating actions, S&P also placed on creditwatch with negative implications all its ratings on Via Banque, ESFG's small French banking subsidiary.

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