Cadwalader, Wickersham & Taft announced the hiring of seven special counsels, including Steven Hodaszy and Craig Wolson to its capital markets department. Hodaszy, who was previously at Sidley Austin and who will be based in New York, will focus on publicly and privately offered MBS and ABS deals. His experience includes representing clients in home equity deals, NIMs and farm and construction equipment loans. Wolson, who was formerly a partner at Duane Morris in New York, and will be based in Charlotte, N.C., will focus on analyzing and structuring ABS, CDOs (both cash and synthetic), as well as deals involving interest rate swaps, CDS and other derivative instruments.
BNP Paribas appointed Arjan Verbeek as co-head of flow products in the securitization group. Verbeek is based in London, and reports to Fabrice Susini, head of European securitization. Verbeek joins from Barclays Capital in London, where he was a director within the financial institutions securitization group.
Alliance Investment Bank has appointed William Tseng as its new director and CEO effective last Monday. Tseng, who has a securitization and structured finance background in the Netherlands and Brazil, will focus on building up the firm's investment banking business.
Deutsche Bank has completed its purchase of Chapel Funding, a Calif.-based mortgage originator. Deutsche Bank said that Chapel Funding's origination and servicing business would be operated under the name db home lending' and as part of bank's global markets RMBS platform. Deutsche also disclosed that db home lending will be licensed in 36 states to offer its network of brokers and different products." This transaction is an important step for Deutsche Bank as we continue to develop a vertically integrated residential mortgage-backed securities business," stated Phil Weingord, managing director and head of global markets Americas at Deutsche Bank. "This new mortgage origination capability gives us significant competitive advantages, such as access to a steady source of product for our securitization program." The deal was announced in May.
Last week Ginnie Mae President Robert Couch and Assistant Secretary for Housing-Federal Housing Commissioner Brian Montgomery met with officials at the Bond Market Association and the American Securitization Forum along with some Street analysts. According to research from RBS Greenwich Capital, one of the major points made at the meeting was that Federal Housing Authority reform appears to be on track, the bill has bipartisan support and is intended to be attached to the appropriations bill in November. It was also pointed out that FHA loans have been mostly replaced by higher cost subprime loans since 2000 and more minority homebuyers pay three percentage points or more over the mortgage market interest rate. There were also changes proposed for the FHA, according to RBS Greenwich, including the increase in loan limit for high cost areas to 100% conforming limit from 87%, the elimination of FHA's 3% down payment requirement as well as increasing the maximum loan term from 30- to 40-years, among other things. RBS also noted that FHA is not planning to make IO loans, although they plan to focus on the "graduated payment" or GPM loans instead. If the bill goes through, Ginnie Mae officials reportedly feel that their loan volume can double in the next five years.
According to a recent study, hedge fund involvement in fixed income trading volume has more than doubled in the last year. Greenwich Associates found in its 2006 Fixed Income Investors Study that overall fixed income trading volume increase by 25% during the 12-month time period - a factor largely attributable to hedge funds. The funds, which have been a large player in the CDO market, are now responsible for some 47% of annual volume in the distressed debt market; 45% in emerging market bonds; one-third in leveraged loans, and a quarter of all high-yield bond trading, according to the study released last week.
Fitch Ratings last week assigned assigned its first CDO stability score report - a new initiative recently launched by the rating agency - to the class I notes of Fortuna Managed Synthetic CDO. The tranche of the deal scored an "STI" mark from Fitch, meaning it has a 90% likelihood of retaining its initial "AAA" rating for one year. On Aug. 2 , Fitch announced the availability of stability score ratings for synthetic CDOs (ASR, 08/07/06).
Subprime mortgage lender New Century Financial Corp. last week raised some cash through a $50 million private placement of trust preferred securities. The securities have an 8.65% fixed rate coupon until Sept. 30, 2011, when the rate floats at three-month Libor plus 3.50%. The 30-year notes mature Sept. 30, 2036. New Century, which operates as a real estate investment trust, announced earlier this month that its August loan production fell by 5% to $5.8 billion from year-ago levels, but noted that issuance of interest-only loans - which comprised 35% of the lender's loan production last year, had fallen to 17%.
In order to better gauge, and incorporate, legal uncertainty in emerging market securitizations, Fitch Ratings has developed a "Challenge Factor" (CF). The grade basically caps the number of notches an emerging market deal can surpass the default rating of the originator, according to a report by the agency. It comes from various factors, chief among them three governance indicator scores put out by the World Bank. These scores cover rule of law, control of corruption, and regulatory quality. The strongest governance indicator is CF1, a category that includes Argentina, Chile and South Korea. The weakest, CF4, features only Nigeria, according to a table in the report. Russia, which has attracted a good deal of buzz about the suitability of its legal system for structured deals (see cover story), scored a CF3. The notching can be altered however. A deal that includes a multilateral development bank like the European Bank for Reconstruction and Development (EBRD) or the International Finance Corp., and is structured in a particular way, can bust through the notching cap.
The Baltic states - Estonia, Latvia, and Lithuania - offer strong opportunities and challenges for structured finance players, according to a report by Standard & Poor's. In the region's favor are swift economic growth of 6% forecast for the next three years, a stable of investment-grade banks operating in the region, and growth in credit, which has been explosive in some asset classes. On the downside, is the region's tiny size of seven million inhabitants and undeveloped laws governing securitization. Securitization isn't entirely alien to the region. At the end of 2004, the Baltic American Enterprise Fund securitized mortgages in a $63.7 million transaction that counted on the support of the International Finance Corp. and the Multilateral Guaranty Agency, both part of the World Bank Group.
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