At press time, the rumor mill was rife with speculation that HSBC's head of Asian structured capital markets Sarwar Ahmad is to leave the firm. Although neither party would comment, several sources, including rival bankers and financial recruiters, confirmed the story. Ahmad joined the bank in June 2001 to establish a securitization franchise from scratch. Despite being the region's biggest bank, HSBC had never executed an ABS deal in Asia until Ahmad arrived. However, with some savvy hires, Ahmad was soon able to position his team as one of the region's most competitive arrangers. Market watchers are eager to see who will replace Ahmad, although with bonus season just around the corner, a replacement may not be appointed imminently.
Robert Warwick has been promoted to CFO of Willis Lease Finance Corp. after the company announced last week that current finance chief Monica Burke would be leaving the firm in mid-January. In a statement, Burke said, "I am very proud of the accomplishments we have achieved during my tenure, particularly the placement of the asset-backed securitization transaction." Burke is referring to Willis Engine Securitization Trust 2005-1, the first-ever term securitization backed by aircraft engine leases completed in July. The $228 million deal was a senior/subordinated transaction via lead manager UBS (ASR 08/01/05). Aside from being the first aircraft lease ABS, the transaction was also the first operating lease asset transaction to price without a monoline surety wrap.
According to market reports, Fitch Ratings is planning to open a Dubai office in April 2006 to meet the growing demand for a securitization market in the region. Stephen de Stadler, managing director in South Africa, will head the Dubai operations.
Detroit-based automaker General Motors Corp. last week said that its financing arm, General Motors Acceptance Corp. would be selling as much as $20 billion retail auto loans over the next five years to Canada's third largest bank Bank of Nova Scotia. General Motors is now trying to raise capital after Standard & Poor's and Fitch Ratings cut its credit rating to junk status in May, forcing GMAC to pay higher interest rates on money lent to buyers of cars and trucks manufactured by its parent company. The sale by GMAC to Scotia Capital, Bank of Nova Scotia's corporate and investment banking division, follows months after the firm made another deal with Bank of America to sell auto loans worth roughly $55 billion in the next five years. According to a statement from GM, Bank of Nova Scotia would initially buy $3 billion in loans in December. The deal's pricing terms have not been disclosed. Early in 2005, GM said that it is considering selling a majority stake in GMAC, considered its most profitable unit.
Bulgarian-based company Trans Investment has applied for a licence to operate in the Bulgarian capital markets. According to market reports, Trans Investment, which is co-owned by Petrol Holding (70%) and Greece's Emporiki Bank (30%), intends to securitize consumer loan receivables, kicking off with a securitization of credit card receivables from Bulgaria's national credit card operator, Transcard.
Moody's Investors Service last week reported that it downgraded only five CDO tranches within four transactions in the third quarter of this year - the lowest number the rating agency has reported since the fourth quarter of 1999. Three of the five downgraded tranches were resecuritized deals, and one was a market value CDO. Meanwhile, Moody's upgraded 17 CDO tranches across 11 deals. Moody's attributes the positive performance to the slew of call options exercised in the quarter, as well as the improved credit quality of underlying collateral. The grass may not be greener in this quarter, however. Moody's at the end of the third quarter had 24 tranches within 13 deals on watch for downgrade, compared with 21 tranches within 13 transactions on watch for upgrade.
Last week the House of Representatives passed its version of the Terrorism Risk Insurance Act (TRIA) extension bill by a 371-49 vote. As passed by the House, the bill would extend the TRIA program for another three years. The bill includes modifications increasing the industry's share of the potential loss burden as well as expanding TRIA's scope to include the insurance of nuclear, biological, chemical and radioactive exposures. On Nov. 18, the Senate passed its own version of the bill, endorsed by the Bush administration and Treasury. The Senate is expected to reconvene Dec. 12. Negotiations in which House and Senate banking members and staff will try to reconcile the differences between the two versions are expected this week. Both the House and Senate are scheduled to adjourn on Dec. 20. The Commercial Mortgage Securities Association expects an agreement on a final TRIA bill on or before that date. The CMSA hopes that the final version will incorporate some of the House provisions, including the creation of a commission that could provide a framework for a permanent resolution.
Ginnie Mae announced recently that during a quality control review, it identified about 2,360 mortgages in 1,693 of its securities that may be buydown mortgages - which are loans with funds contributed from third parties to reduce monthly payments in the early part of the mortgage - and thus ineligible for those securities. Ginnie's program requirements prohibit including buydown loans in certain securities. In the next phase of the review, Ginnie Mae will work with its issuers to see whether these loans are in fact buydowns, or have been misreported by issuers. If the loans turn out to be buydowns, Ginnie Mae will require issuers to substitute eligible mortgages or buy them out of the pools. The loan review has led Ginnie to expand its quality control efforts by establishing a formal quality control function in the Office of Program Operations. Among other things, the expanded quality control procedures include a periodic post-issuance review of outstanding Ginnie Mae securities. Ginnie Mae already performs pre-issuance quality control reviews. The post-issuance review provides additional assurance that outstanding securities comply with Ginnie Mae program requirements. A list of the specific securities and the number and unpaid principal balance of the possible buydown loans can be found on Ginnie Mae's Web site at www.ginniemae.gov.
(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.