The Islamic Development Bank has opened a structured finance unit in Saudi Arabia, according to a source close to the situation. The move is in response to demand from member countries to finance large infrastructure projects with private sector participation. The IDB is working with consultants to create a business plan for the unit, which was established last year. The plan, which will be submitted to the bank's board of directors for approval, would include a five-year orientation, as well as a three-year rolling implementation plan. Sectors served could include agribusiness, sub-sovereign risk (municipality and commercial public sector), SMEs and micro-finance, including micro-insurance. The bank is reviewing direct lending via project finance or corporate finance; direct equity investment in private companies; local currency financing, including through Sukuks; guarantees, infrastructure funds; syndications and technical assistance funds, according to bank documents.
Subprime mortgage company Novastar Financial Corp. is set to close its first CDO next month, bringing the lender into a relatively small but growing group of originators using CDO technology as another form of financing. The deal came to market as a $347 million static mezzanine deal backed by subprime collateral. Novastar, which operates as a REIT, will retain 100% of the equity and is servicing some 30% of the collateral. So far, the lender has not hired additional staff for its CDO effort, according to Fitch Ratings.
In the latest string of acquisitions of subprime lenders, Credit Suisse Group last week signed an option agreement to buy Brea, Calif.-based subprime lender ResMae Financial Corp. The agreement gives Credit Suisse the right to buy 100% of the company's outstanding shares or certain agreed upon assets. The option expires on Feb. 9. ResMae was founded in 2003 by former Long Beach Mortgage Co. executives M. Jack Mayesh, Ed Resendez and Bill Komperda. The top 20 subprime lender had been rumored in recent months to be struggling. Also last week, Citigroup announced it would acquire ABN Amro's mortgage group. The purchase includes $9 billion in net assets and a $224 billion mortgage servicing portfolio. Citi said the acquisition demonstrates its commitment to grow its U.S. consumer lending business. Indeed, the acquisition is expected to lift Citi to the fourth-largest mortgage loan servicer and solidify its number three spot among mortgage originators. The deal, terms of which were not disclosed, is expected to close in the third quarter.
Bank of America expanded its London-based global structured finance team last week with the addition of two new hires. Richard Downer joined as head of mortgage principal finance and Neil Warman joined as deputy head of mortgage principal finance. The duo reports to Steve Skerrett, head of asset-backed securities origination for Europe, the Middle East and Africa (EMEA). "[Downer and Warman's] expertise in developing principal opportunities within the residential mortgage sector will help us expand our EMEA capabilities," Skerrett said. Downer spent most of his 18-year career as an investment banker in structured finance roles for Greenwich NatWest, ANZ and Merrill Lynch. He was most recently with Bear Stearns, as was Warman, who worked in the company's mortgage and consumer finance group.
Viktoria Baklanova joined Fitch Ratings earlier this month as co-head of its fund and asset manager rating group. Hopping over from rival Moody's Investors Service, Baklanova will be responsible for the analytical coverage and rating analysis of the largest global investment advisory companies with an aggregate of over $800 billion under management. Baklanova will be based in New York but report to London-based Said Rafat, managing director in financial institutions group. Baklanova is known in ABS circles as an active promoter of Russian securitization and has organized conferences on that burgeoning market.
According to published reports, big changes may be in store for Royal Bank of Scotland Group Plc in 2007. In an effort to arrange more sales of asset-backed debt and financing of takeovers, the bank plans to add approximately 100 bankers in Japan this year. The firm is bulking up its Tokyo sales force and adding bankers to its real estate financing and client coverage teams. Moreover, leveraged financing for takeovers is also becoming a key area for the bank in Japan. This most recent plan comes after the Edinburgh-based firm more than doubled its Japanese payroll to 250 over the last three years.
Last week, Societe Generale Corporate & Investment Banking announced its performance in 2006, which confirmed its leading position in three areas: Euro capital markets, structured finance and derivatives. Based on its performance, the bank received the overall best bank and best bank in France awards from Euromoney in 2006. Among its various high rankings and awards, in euro debt capital markets Societe Generale Corporate & Investment Banking ranked fifth for all international euro-denominated bonds, second for all euro-denominated corporate bonds, second for all euro-denominated sovereign bonds, fifth for all euro-denominated bonds for financial institutions and third for global securitization in euros according to Thomson Financial as of December 31, 2006. Jean-Pierre Mustier, CEO of Societe Generale Corporate and Investment Banking said he expected his unit to continue building market share.
Last week, Fitch Ratings assigned the first construction loan servicer rating to JP Morgan Commercial Real Estate Loan Administration (CRELA) in the U.S. The rating agency rated CRELA "Acceptable" as a construction loan servicer for commercial real estate loans after taking into consideration CRELA's history of construction loan administration, project underwriting and servicing, experienced and tenured management and staff, and the operational risk and financial resources provided by JP Morgan Chase & Co., CRELA's parent company. The rating also reflects CRELA's use of technology, including its proprietary construction loan administration system and its web-based platform for borrowers. Lastly, Fitch also considered construction specific methodology, which includes loan documentation and closing, risk/asset management, environmental risk management, disbursement administration and loan servicing operations.
GSI Securitization announced last week that it has signed a definitive agreement with Silar Advisors to finance medical receivable acquisitions and other investments to medical institutions. Currently, GSI is involved in negotiations with a number of medical institutions to buy their patient account receivables. Because of this new relationship, GSI can significantly expand its customer base and possibly increase earnings. Moreover, the company plans to move forward with its planned implementation of its controlled growth strategy. "We are looking forward to a long term mutually profitable relationship with Silar Advisors and significant growth with our strategic relationship partner," said GSI CEO Gunther Slaton.
Andrew Davidson & Co., a provider of risk analytics, will unveil a new loan dynamics model at the upcoming ASF Conference. The tool projects prepayments, delinquency, default and loss severity on non-agency mortgages. With this new products, the company seeks "to address the mounting needs of firms that issue or invest in credit-sensitive mortgages and related securities like Alt-A, high LTV and subprime loans," the company said in a release. "The model produces required performance metrics such as CPR (prepayment), CDF (default), 60 [day] + delinquency and loss severity, given loan characteristics and a scenario for interest rate and housing price indices."
Thanks in large part to a significant drop in hotel delinquencies, the U.S. CMBS delinquency index continued to fall another five basis points, according to Fitch Ratings' most recent U.S. CMBS loan delinquency index. "Delinquencies in all property types remained relatively stable with the exception of hotels," said senior director Britt Johnson. "Hotel delinquencies fell to 8.1%, or by $86 million, as of December, from 12.9% in November." The drop is due to a rather surprising source, said Fitch, an $84 million loan collateralized by a hotel property in New Orleans, LA. To be more specific, the loan was transferred to the special servicer in September 2006 due to payment default. Then, in December, the loan was brought current on principal and interest payments, but the loan remains with the special servicer under a short term forbearance agreement. "Although the loan is now current, given the uncertainty regarding the recovery of the New Orleans market, payments of debt service obligations could be an issue in the future," continued Johnson. CMBS delinquencies dropped to 0.42% in December and the seasoned delinquency index, which omits transactions with less than one year of seasoning, dropped six basis points this month to 0.51%.
The Ukraine's first RMBS has secured ratings from Moody's Investors Service. Arranged by UBS and originated by PrivatBank, the transaction should total about $180 million, according to a pre-sale from the rating agency. Moody's rated a $134 million A piece Baa3' and a $37 million B piece Ba3'. A $9 billion C chunk went unrated. All tranches have a legal final of 25 years. The deal features political risk insurance from Steadfast Insurance Co. The average size of the underlying loans is $17,141, while the current LTV is 76.6%.
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