CDOs

Sandler O'Neill is keeping a toe-hold in the CDO market, despite the events of Sept. 11, via a $766.25 million arbitrage cashflow trust-preferred securities-backed CDO. The firm will co-lead MM Community Funding II CDO with Salomon Smith Barney, reports IFR Asset-Backed Securities. The trade priced at +100 basis points over six month Libor (A/L 12.8y) on the triple-A notes. The transaction is backed by new issue trust-preferred securities from approximately 50 regional banks. The single-A cleared at +220 (modified duration 11y). The equity in this deal has an approximate 19% total return, sources said.

Despite having its CDO origination and sales team dispersed to four different locations in Tri-state area - after abandoning the firm's World Financial Center office space - Lehman Brothers has managed to print $1.48 billion worth of U.S. CDO paper since Sept. 11. The second most active firm after Lehman since the terrorist attacks has been JPMorgan, according to Thomson Financial. Lehman has had a strong year for CDOs, using a strategy of picking top-tier managers that are known for quick execution and a relatively easy sell on the first-loss tranches.

News

Brazil's Grupo Votorantim, one of the largest industrial companies worldwide, finally closed its $300 million export-receivables deal that was rumored to be rushed for unclear reasons and originally expected to close in August (see ASR 7/30/01). According to sources, the deal was delayed as a result of the events on Sept. 11.

The North Carolina State Education Authority was out with an approximate $260 million of term student loan ABS last week through the lead of Wachovia Securities, sources said. The offering will contain both three-month Libor and C.P.-indexed classes, the majority falling in the Libor side of the equation. Also included are $60 million of auction-rate securities. Enhancement for the deal comes in the form of 3.7% subordination, 2.1% overcollateralization and a reserve fund totaling 3%. The loan pool consists entirely of FFELP-guaranteed loans.

Citigroup's equipment securitization of Copelco Capital collateral, planned for this year, has reportedly been postponed past the year-end mark. According to market sources, the transaction will be backed by a portfolio of healthcare, commercial and industrial-type machine equipment.

The $500 million to $600 million deal will be issued via Salomon Smith Barney, also a unit of Citigroup. Citigroup acquired Copelco in May 2000 from Itochu International, and has consolidated the platform into CitiCapital, its equipment finance arm.

While the recent corporate credit downgrades are not expected to hurt outstanding ABS issued by the Big Three auto firms, they are expected to increase the companies' reliance on structured markets for funding, according to Paul Kelly, managing director of ABS consumer assets at Standard & Poor's.

"In anticipation of the corporate rating action, the Big Three managed their liability and capital structures and liquidity positions, and, to varying degrees, increased their issuance of structured debt transactions and access to the asset-backed market as an additional source of funding and liquidity," Kelly said. "This will result in an increase in the volume of auto-related asset-backed term deals as well as in structured commercial paper."

People

Financial Security Assurance has promoted Sean W. McCarthy to president and chief operating officer, reporting to Robert P. Cochran, chairman and chief executive officer at FSA. McCarthy succeeds Roger K. Taylor. Taylor will remain president and chief operating officer of FSA Holdings, where he is responsible for all of FSA's direct investments and related new business initiatives.

Ratings

Standard & Poor's lowered its long-term sovereign credit rating on the Republic of Panama to double-B' from double-B'-plus and the outlook is stable. The rating change comes as a result of future prospects for higher fiscal deficits. The government deficit is expected to deteriorate further and nearly one-third of government revenue may have to be allocated to interest payments in 2002. S&P expects the public-sector deficit to reach 3% of GDP in 2001, versus the 0% which was targeted in the International Monetary Fund's program.

Calendar 2001/2002

Postponed - Dec. 3-5: Palm Beach, Florida - Commercial Paper will be presented by Information Management Network. For more information, visit www.imn.org.

Dec. 6: London: Fitch will host a mini-seminar for investors and analysts regarding Structured Investment Vehicles. The seminar will begin at 11:30am and last for approximately an hour and a half. For more information, call 44 (0) 20 7417 6259/6257 or email esf@fitchratings.com.

Jan. 6-8: South Beach, Florida - Commercial Mortgage Securities Association will host the CMBS Investors Conference. For more information call 212-509-7844 or visit www.cmbs.org.

Feb. 6-9: Phoenix, Arizona - Information Management Network will host the seventh annual investors' and issuers' summit on Asset Securitization 2002. For more information visit www.imn.org.

Feb. 10-13: Scottsdale, Arizona - The Strategic Research Institute will host the ninth annual Asset Securitization 2002 symposium, an investor and issuer forum. For more information, visit www.srinstitute.com.

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