Many asset-backed commercial paper professionals were in poor spirits following last Wednesday's Financial Accounting Standards Board meeting on the SPE consolidation exposure draft. Apparently FASB furthered its view that the financial SPE (FSPE) should not be incorporated into the final guidelines. Also, the silo approach, another interpretation that would have benefited the ABCP market, looks like it will be more difficult to adopt as per these subsequent discussions. Cited from Deloitte & Touche's informal post-meeting commentary, "A transferor would not adopt the silo approach unless they had specific rights and obligations with respect to specific liabilities of the conduit."

"From what I've seen, all indications point to the sponsoring bank having to consolidate, and that is not good news," said one ABCP professional.

Another source added, "It wouldn't shock me if they didn't have this done by year end as planned. I doubt FASB will put out an inconclusive final interpretation, and there are still a lot of uncertainties."

Also of note, non-transferor investors in FAS 140 qualifying SPEs are not exempt from consolidation. Deloitte's commentary stresses that all decisions reported from the FASB meeting are tentative. FASB meets again this Wednesday to further discuss the exposure draft.

Equipment manufacturer CNH Global announced last week that it planned to sell roughly $1 billion of equipment installment contract-backed ABS in November, according to published reports. It is unclear who would lead manage the offering, though CNH's most recent securitization priced in March via Banc of America Securities.

The buzz in Mexico City is that Santander has clinched the mandate for a Ps2.05 billion (US$201.1 million) deal backed by payroll taxes. The state of Mexico is the originator. Ratings agency have not pronounced themselves on the deal yet, but Fitch Ratings and Standard & Poor's have the state at BB+/BBB- on the national scale. Most players in the local capital market bid on the deal (see ASR 10/14, p.17).

Mexico may also see some action in the way of auto loan-backed deals. "It's a large market," said Luis Villalobos, CEO of Banamex Casa de Bolsa. He estimated that about 1 million cars are sold annually in the country, with about half being financed. While banks are studying the market, Villalobos said there's an issue that needs to be cleared up. Under local regulations, pension funds can't hold more than 5% of their portfolio in debt from a single company. Car companies are among the major issuers in Mexico, so many funds are nearly maxed out on paper from the likes of Ford Credit or GMAC. Whether regulators will treat securitizations of credit originated by these companies as direct issuance remains to be seen, Villalobos said.

Bad timing...

As if the suggestion of fraud overhanging the securitization industry wasn't already overstated last week (see NCFE p. 1), a story appeared in the Wall Street Journal recounting the Commercial Financial Services debacle of the late 1990s. CFS was a securitizer of charged-off consumer receivables that defrauded investors through an elaborate (for its time) shell company scam. Also, the Journal story highlighted a lawsuit filed by investors against industry icon Jason Kravitt of Mayer Brown Rowe & Maw, for his role at then Mayer Brown & Platt, which was the CFS securitization counsel. By ASR's count, this is the second time Kravitt has appeared in the Journal this year (pencil sketch and all), the first time being when the Journal uncovered securitization's link to SPEs.

Marketing is underway via CSFB for a E250 million CDO of ABS to be managed by PIMCO. This transaction will invest 70%-80% of the proceeds in European ABS and the remaining in U.S. ABS. The capital structure features E200 million of 6.7-year triple-As, E31 million of single-A and E10 million of triple-B. There is also E13 million of equity.


Moody's Investors Service managing director Isaac Efrat has announced that he will be leaving the rating agency. Efrat, who handled CDO ratings at Moody's, did not announce what would be in his future.


November 7-9: Palm Beach Gardens, FL: The Bond Market Association's Fixed-Income Securities Operations Conference will be held at the PGA National Resort & Spa. For more information, call 212-440-9429 or email

November 21: New York, NY: The Bond Market Association's Fixed-Income Summit & Expo on E-Commerce and Technology will be held at the Marriott Marquis Hotel. For more information, call 212-440-9429 or email to

December 12: New York, NY: The Bond Market Association presents the Repo & Securities Lending Conference at The Roosevelt Hotel. For more information call 212-440-9429 or email

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