Late last week rumblings surfaced that Chris Ricciardi, the head of CDO orginiation and structuring at Merrill Lynch, has left the firm. When reached on his mobile phone, Ricciardi declined to comment, as did officials at Merrill. But talk on the Street was he left the bank last Thursday, though his destination was uncertain. Ricciardi is perhaps the top CDO banker on Wall Street and is believed to be the best paid as well. He joined Merrill in 2003 from Credit Suisse, bringing his top lieutenants with him. Merrill quickly vaulted to the top of the CDO league tables under his guidance. In addition, CSFB became the leading CDO underwriter during Ricciardi's tenure with the firm. Merrill paid bonuses a couple of weeks ago.
Glenn Schultz has left JPMorgan Chase to join RBC Dain Rauscher Inc. Schultz started working as a managing director at RBC on Feb. 3. He reports to Greg Coffman, head of mortgage sales and trading, and Lauren Carlson, head of RBC's asset securitization group. He will work out of the company's Chicago office, splitting time between mortgage ABS and the mortgage trading desk where he will focus on new issues.
Cantor Fitzgerald announced that it has hired Frank Monteleone as a senior vice president of agency trading for its debt capital markets group. Monteleone, who previously worked at FTN Financial, will be based in Cantor's Memphis, Tenn., office and will report to Bill Lawhorn, managing director of the agency business and head of Memphis trading. Cantor said in a statement that its Memphis office is focused on providing sales and trading across debt instruments such as corporate bonds, mortgage-backed securities and asset-backed securities.
CapitalSource Finance announced that Andrew Niesen has joined the company as a business development officer in the structured finance group. He is responsible for originating loan transactions to the resort, mortgage and specialty finance sectors nationwide and is involved in loan syndication and securitization initiatives. Niesen was previously a vice president in the capital markets group at Textron Financial. He arranged the sale and distribution of the company's loan assets through various special purpose vehicles used to manage individual borrower or industry concentration risk. While at Textron, he was involved with loan and portfolio sales in excess of $1 billion to a variety of institutional investors, primarily concentrating on the golf and resort finance industries. Niesen is based in Philadelphia.
BNP Paribas appointed David Pawlowski as a director in the bank's New York whole loan trading group, which is a part of BNP Paribas' fixed income business. Pawlowski, who will report to Gregory Lattanzio, the head of whole loan trading, will be in charge of managing due diligence, contract finance and transaction management functions for the group. Pawlowski formerly worked at Mortgage Data Management Corp. in Milwaukee as a managing director. He has also worked at Kidder Peabody as a senior vice president and senior whole loan trader, and at Credit Suisse as a manager in mortgage conduit operations.
Calyon has acquired 100% of the shared capital of Omicron Invest Management, a fully licensed CDO management firm based in Vienna that was founded by Marcus Klug and Manfred Exenberger. According to a joint company press release, Klug and Exenberger will bring to Calyon their experience in the management of CDOs investing in ABS/MBS/CDOs. Both have actively developed quantitative models to capture CDO risk, and are planning to continue building this technology with their new partners.
The frequency of U.S. ABS downgrades dropped from 8.5% in 2004, to 1.8% in 2005, and was attributed primarily to a dip in manufactured housing downgrades, reported Moody's Investors Service. By contrast, the frequency of upgrades increased to 3% from 2%. Home equities represented the largest contributor to ABS downgrades in 2005, though home equity ratings maintained a stability rate of over 96% and performance in the sector was in line with the previous year. The downgrade rate for U.S. CDOs continued to drop in 2005, to 3% versus 5.6% in 2004 and 16.5% in 2003. Eighty-two percent of U.S. CDO downgrades occurred in resecuritization CDOs, hurt by a few persistently weak segments of the ABS market. Meanwhile, the CMBS upgrade rate rose to 16.4% in 2005 from 8.8% the prior year. RMBS also experienced high upgrade and low downgrade activity with the mortgage pools backing these transactions continuing to exhibit low losses and high prepayments. The downgrade rate for 2005 was 0.9%, representing the sixth consecutive year that the RMBS sector's downgrade remained below 1%.
The Federal Trade Commission's investigation into Bear Stearns' mortgage servicing unit, EMC Mortgage Corp., does not merit initiating a rating action at this time, said Fitch Ratings. EMC received a civil investigative demand from the FTC, seeking documents and data related to the servicer's business and servicing practices. This led to numerous investor inquiries regarding Fitch's ratings for EMC, including: Alt-A and subprime servicer RPS1' and special servicer RSS1.' The FTC investigation is in a very early stage with EMC still gathering the documentation requested by the regulator. The rating agency is monitoring the investigation's progress and will initiate a rating watch or downgrade if conditions warrant.
The European Commission said that by April 1, it plans to issue its decision on whether European Union member states can securitize unpaid taxes to raise cash in order to cut their budget deficits. The same deadline is set for EU member states to report debt and deficit figures for 2005. Greece, which has its own securitization of unpaid taxes awaiting the decision, reported on Feb. 3, that it received preliminary approval from the Commission to use securitization proceeds for budget revenue. However, a spokesperson for the Commission could not confirm if the deal has been approved.
European RMBS is expected to continue generating strong issuance volumes, additional structural innovations and a number of new market entrants this year, said Fitch Ratings. The U.K. market will again lead the way with a growing number of transactions as well as inventive structures. New RMBS issuers are expected to enter the U.K. non-conforming sector. "Continued healthy European RMBS growth is expected despite up-ticks in arrears in some countries and potential challenges to the sector with Basel II implementation on the horizon," said Stuart Jennings, managing director with Fitch's European RMBS team. "Despite the availability of covered bonds as an alternative funding source of mortgage funding, continued tight RMBS pricing maintains its attraction as a funding source."
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