Last Thursday the Financial Accounting Standards Board posted its set of FASB staff positions - six in all - to clarify some of the rules pertaining to FIN 46. Refer to the board's Web site,, for more details.

Despite the headline challenges, Lehman Brothers is making a play in the tobacco settlement legal fee-backed arena, said to be near an inaugural transaction, pending market conditions. According to a source familiar with the developments, because of the fundamental downward ratings shift for the tobacco industry, it will be difficult for a deal to score higher than the triple-B-plus level, capped at the credit perception of the industry by the rating agencies.

Merrill Lynch's new global head of CDOs, Christopher Ricciardi, poached two of his former structuring team members from Credit Suisse First Boston, reported IFR Markets last week. Plamen Mitrikok (VP) and Sharon Eliran (associate) are both joining Merrill's structuring group. The firm has approximately 15 CDO team members in the U.S., 15 in London and three in Tokyo.

The first book providing inclusive coverage of the financial and legal aspects of securitization in emerging markets hit the stands earlier this month. The book is titled La Titrisation des Actifs and is co-authored by BEMO Securitization Vice President Iyad Boustany and legal counsel Dr. Nasri Diab. The book, published in French, encompasses asset class particularities and structuring technologies, among its many subjects.

In Lebanon, a new 5% tax was approved that will be levied on all capital gains/interest revenues and fiduciary deals. The tax will affect securitization transactions and will impede any deal from reaching full fiscal transparency. Sources explained that some deals would be exposed to double taxation, especially those structured via Lebanese financial institutions, which are not treated as banks for the purpose of this tax.

S&P revised its outlook to negative from stable on the $157.8 million equivalent senior secured notes issued by City Aviation Finance Ltd. The outlook is based on the expected deterioration of the debt service coverage ratio resulting from lower passenger traffic and a weak economic climate.

West LB upped its offer for Anglian Water to $1.5 billion equivalent via its Bream Investments vehicle. The bid was rejected on the grounds that it fell short of an acceptable price. AWG completed a whole business transaction last year, but a change of ownership is allowed under the terms of the deal, sources said, as long as the majority of creditors are not worse off from a ratings perspective.

CDO downgrades for 2002 were up 270% from the 2001 period, stated Moody's Investors Service's CDO rating transition study released last week. But the universe of rated tranches increased by over 40%, the report said. Overall, three CDO sectors comprised 75% of CDO downgrade activity last year. Arbitrage cash flow CBOs accounted for 55% of all downgrades, non-U.S. dollar synthetic arbitrage CDOs comprised 13% and U.S. dollar synthetic arbitrage CDOs made up 7%. However, not all sectors were vulnerable to high downgrades in 2001. Performance in arbitrage cash flow CLOs, which is the second largest CDO sector following arbitrage cash flow CBOs, remained stable during 2002. Downgrades in this sector represented less than 6% of total downgrades for the year. Emerging markets CBOs, balance sheet cash flow CLOs (U.S. dollar and non-U.S. dollar) and market value CDOs all posted nominal downgrades as well.

Fitch Ratings last week downgraded a class from Bear Stearns Mortgage Securities, Inc.'s mortgage pass-through certificates, series 1996-3. Class B5 was downgraded to CCC' from B.' The rating agency cited the high delinquencies relative to the applicable credit support levels.

Last week, Moody's downgraded two series of mutual fund fee securitizations issued by Citibank in 2002. The agency nicked Series 2000-R4 to B3' from Ba1,' and Series 2004 to B3' from B1.'

One-fourth of homebuyers aged 50 and older are paying more for newer homes than they did for their previous ones. These new homes generally feature amenities like structured wiring and exterior maintenance services, stated a study by the National Association of Home Builders (NAHB) and Countrywide Home Loans. The study was designed to determine what baby boomers and older homebuyers want.

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