Merrill Lynch announced details of changes in its Asia Pacific structured finance business. Jim Yang will move from New York to Hong Kong to lead the bank's Asian-based finance, securitization and principal investments group. He will report to Michael Blum and Shinji Yoshikawa. Yang replaces Rajiv Garg, who will relocate to India to head up the asset-based finance securitization and principal investments effort in the rapidly expanding market. The bank also appointed Tim Grady managing director and head of Pacific Rim commercial real estate principal investments.
It is likely to be an active period for hires in Asia, particularly now that bonuses for 2005 have been paid. HSBC has yet to appoint a permanent replacement for Sarwar Ahmad, its former head of Asian securitization who left at the end of last year. Market whispers suggest major investment banks such as Morgan Stanley and Goldman Sachs are looking to hire with a view to exploiting opportunities in China.
Chris Ricciardi, the former head of CDO origination and structuring at Merrill Lynch, has resurfaced as CEO of Cohen Brothers, a Philadelphia-based boutique shop, say sources familiar with the matter. Founder Daniel Cohen apparently moves into the role of chairman. Cohen manages a number of CDOs specializing in deals backed by trust preferred securities. Ricciardi departed from Merrill a little over three weeks ago.
SunTrust Mortgage named Anthony "Tuck" Reed executive vice president and head of secondary marketing. Reed will oversee all aspects of the company's capital markets operation, including trading and risk management, agency and non-agency securitizations, pricing administration, product development, MBS delivery and settlement and mortgage investor relations. Reed was formerly with Bank of America in Charlotte, N.C., where he was senior vice president and head of mortgage company capital markets. Before holding that position, he worked for Wachovia Securities as vice president of conduit programs. He was involved in trading and securitizing residential mortgages.
Nomura Securities released a report last week on reauthorization of the Higher Education Act and the resulting changes to federal student loan programs. Nomura said the changes should impact student loan ABS in the following ways: new deals backed by federally reinsured student loans should require greater credit enhancement starting in July, though older deals should be unaffected; prepayments should rise through June and drop thereafter; and new federally reinsured loan volume should increase at the expense of private loans. Nomura analysts explained that deals backed by loans with the lower reinsurance percentages - dropping to 97% for most loans - will be exposed to potentially larger uninsured losses compared to earlier deals. The rating agencies should also require somewhat higher levels of credit enhancement to counterbalance the greater risk, Nomura analysts added.
Fitch Ratings announced last week the development of Fitch Alert Surveillance Tracker (FASTracker), a Web-based portfolio management tool allowing investors to actively monitor how new research and other performance data are impacting bonds in the U.S. ABS, CMBS, RMBS and CDO sectors. The structured finance monitoring aid - which will be used along with the bond and performance data available on the Structured Finance portion of Fitch Research - allows users to build a portfolio of Fitch-rated structured finance bonds, set customized or pre-defined performance triggers and receive e-mail alerts when a trigger is breached. FASTracker has a report functionality allowing users to download preset customized performance reports into Microsoft Excel.
Moody's Investors Service last week assigned provisional ratings to the five tranches of notes to be issued by Wood Street CLO II, a high yield collateralized loan obligation managed by Alcentra Ltd. The 200.7 million ($239.9 million) class A senior secured floating-rate notes were rated Aaa'; the 23.3 million ($27.9 million) class B senior secured floating-rate notes were rated Aa1'; the 19.4 million ($23.2 million) class C senior secured deferrable floating-rate notes were rated A1'; the 18.9 million ($22.6 million) class D senior secured deferrable floating-rate notes were rated Baa2'; and the 6.8 million ($8.1 million) class E senior secured deferrable floating-rate notes were rated Ba2.' The 300 million ($358.4 million) CLO invests in predominantly European senior secured loans and mezzanine loans. However, investments may also include synthetic exposure and non-European issuers, Moody's said. The transaction was arranged by Credit Suisse.
European auto securitization activity will see more deals privately placed via conduit transactions, according to an industry source. Several auto manufacturers are exploring dealer floor plan structures. Europe saw its first public dealer floor plan securitization last year via Cars Alliance Funding PLC. However, it is likely that the deals that will come to market this year will be done through the private market, said an analyst at Standard & Poor's. S&P rated the first public deal and tends to see many of the private dealer floor plan structures as well. Car rental securitizations, a well-established asset class in the U.S., is another area that is expected to generate volume in Europe. The industry source said there were transactions that occurred in Europe last year that were privately placed. The deals anticipated this year are expected via the private placement market.
Fitch Ratings said container ship securitizations could achieve an investment grade rating, and they are similar to those of commercial aircraft since the sectors' values are both volatile. However, the container ship market is less deep and liquid compared to the commercial aircraft sector. There are far fewer third-party sales and charter rates are very volatile. But Fitch expects that a business trust or securitization of container ship assets could reach investment grade by using prior aircraft securitizations as a criteria template. The additional risks in a container ship securitization would be covered under more conservative criteria than commercial aircraft at similar LTV or coverage ratios. Standard & Poor's rated the first container ship securitization earlier this month at AAA.'
RiverSource Investments, a subsidiary of Ameriprise Financial, launched six new mutual funds, including an emerging market bond fund and a floating rate fund. The RiverSource Emerging Markets Bond Fund, which is managed by the firm's Minneapolis-based fixed income team, aims to invest primarily in emerging markets debt securities with limited exposure to foreign currencies. The RiverSource Floating Rate Fund will invest primarily in floating rate debt instruments, including bank loans, adjustable rate mortgages and floating rate asset-based securities. "The fund may also invest a portion of its assets in non-floating rate instruments, including a range of fixed income securities and short-term money market instruments for liquidity, diversification and incremental return," RiverSource said. Managers of this fund, who will focus on bottom-up credit selection for individual investments, include members of the Minneapolis-based fixed income team and the firm's Los Angeles-based bank loan team.
(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.