Merrill Lynch & Co. next month plans to bring to the market a $1 billion high-grade cash CDO, the Monterey CDO Ltd. Dynamic Credit Partners LLC, a New York-based privately held CDO and hedge fund manager, will manage the deal, which is backed by residential mortgage-backed securities and CDOs. The deal has a 22% bucket for CDOs and a 78% bucket for RMBS, and up to a 30% bucket for synthetic assets. The CDO will be the fourth for DCP, which was founded in 2003. The CDO will add to the $1.5 billion of existing CDOs under management at the firm. They include the $250 million Lenox deal, which is a CDO squared, the $1 billion Barrington CDO, backed by high-grade ABS and CDOs, and the $250 million Stockbridge deal, which is also a CDO squared.
National City Corp. formed a new structured products group within the firm's capital markets division. Timothy Yanoti joined as senior managing director and head of the structured products group while Peter McCarthy will be senior managing director and head of the mortgage capital markets group, which is part of the structured products group. Both will be based in New York. Yanoti and McCarthy both have more than 15 years of securitization experience. Yanoti was most recently in charge of global securitization at General Electric Capital while McCarthy was formerly head of mortgage trading and sales at GMAC Residential Funding Corp., where he oversaw the purchase and securitization of prime and subprime residential mortgages.
GE Commercial Finance - Corporate Lending announced last week that senior managing director Joseph Nemia has been elected president of the Commercial Finance Association, the trade group of the asset-based financial sector. Nemia joined GE Commercial Finance in 1992, and has been key in building the firm's corporate lending arm. He was recently named head of the specialty finance division at GE Commercial where he will continue to lead corporate lending's restructuring, retail and transportation efforts while growing the firm's project finance and securitization businesses.
Deutsche Bank Securities announced last week that James Joyce and Don Scott have joined the firm as directors in the securitized products group, which is under the bank's global markets division. They will be based in Toronto. Scott, who will oversee the newly formed group, and Joyce will focus on the origination, structuring and execution of asset-backed deals in the capital and commercial paper markets. The new hires, who are formerly from CIBC, will report to Frank Byrne, who is global head of asset finance.
The International Capital Market Association, the International Swaps and Derivatives Association and The Bond Market Association announced last week the formation of the Global Capital Markets Board. The new board is intended to offer a "strategic vehicle for coordination, collaboration and transparency between the key organizations representing the capital markets regionally and worldwide," according to a joint press release. The new group will also provide a forum for the exchange of ideas between the three associations, and is aimed at facilitating the development of common industry positions on market, regulatory and legal issues.
Wachovia Corp. said the Office of the Comptroller of the Currency approved the conversion of Westcorp's Western Financial Bank from a federal savings association to a national banking association, eliminating the last regulatory hinderance to Wachovia's acquisition of Westcorp and WFS Financial, an auto finance company, 84% owned by Westcorp. The shareholders of both companies approved the acquisitions on Jan 6. Wachovia said last week that the sale is expected to close this quarter.
Standard and Poor's said last week that it expects U.S. CMBS loan origination and issuance to be strong this year. Kim Diamond, a managing director at S&P, stated that issuance could match or exceed 2005 levels while fundamentals should remain strong for all asset classes. Delinquencies are expected to remain steady in 2006, with the delinquent total predicted to remain at roughly $3 billion. However, the delinquency rate, currently at 0.84%, may continue to drop as new issuance activity remains strong. Rating activity in 2006 is likely to remain positive, but not as robust as it was in 2005. As the industry matures, S&P expects CMBS issuers to offer more creative products this year to boost margins. They may include nontraditional collateral types, such as construction loans. The use of CDO vehicles will continue to grow. Diamond added that there could be a rise in small balance commercial loan pools and a growing use of synthetic products.
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