Predicting a growth in ABS deals secured by revenues from natural resources, film royalties and casinos, Fitch Ratings created a structured finance new asset group, and appointed Dan Chambers, a managing director in its CMBS group, to manage it.
Fitch expects that securitization in those asset classes, and unusual assets with operating business components, will continue to accelerate in 2007, with volume projected to be up 30% or more over 2006. Furthermore, many deal proposals in recent years have incorporated structural approaches from the CMBS group, and Fitch hopes to draw on Chambers' experience in the CMBS area to develop criteria in the new group. Chambers was a director in Fitch's CMBS group, where he spearheaded the development of methodologies and criteria for new assets, Susan Merrick, Fitch's managing director and head of its CMBS group, said. In his new role, Chambers will report to Merrick and Kevin Duignan, managing director and head of the ABS group. He joined the rating agency nine years ago, after working in the real estate lending business at Sumitomo Bank.
JPMorgan Chase Chief Executive James Dimon said last week the company would be selling nearly all of its new subprime originations into the secondary market. JPMorgan said it sold off the majority of subprime loans it made last year, and that an additional $4.5 billion should be sold in the first half of this year.
United Capital Markets' Chief Executive John Devaney entertained the audience at ASF 2007 in Las Vegas last week. At Monday morning's hedge fund panel, Devaney expressed his views on the subprime mortgage market. "I personally hate subprime - and I'm kind of hoping the whole thing explodes," Devaney said. For a firm that has made its mark by trading distressed bonds, perhaps the news did not come as a huge surprise. However, Devaney said he so dislikes subprime bonds that he's actually investing in RMBS. In an "up in quality" strategy, United Capital's portfolio currently consists of 30% to 40% RMBS, he said, with FICO scores ranging from 700 to 715. The subprime bonds that Devaney does hold, he hates. "You are just dancing on the edge of a razor blade. They just fall off a cliff. They are awful investments," he said. So how are the rating agencies able to rate subprime bonds triple-A? "Those guys are human just like anyone else," Devaney said. "They've made some bad calls." But since United Capital made a fortune buying distressed manufactured housing bonds - once rated triple-A - for cents on the dollar, maybe the rating agencies aren't so bad after all, he pondered.
Merrill Lynch last week formed a joint venture with financial services company Irish Life & Permanent to create Springboard Mortgages, a Dublin-based mortgage lender. The lender will specialize in nonconforming mortgages, an area the new company's chief executive Shane O'Sullivan described as "underdeveloped" in the country. Springboard will offer direct and intermediary services.
Nomura Credit & Capital is marketing its first commercial real estate CDO. The $950 million Nomura CRE CDO 2007-1 consists primarily of commercial mortgage whole loans and has a six-year reinvestment period. Apparently, changes in the "corporate landscape" at Nomura are expected to lead to "significant opportunities" for the firm to grow a third-party asset management business, according to a Fitch Ratings presale report. The commercial real estate finance group of NCCI, a commercial real estate asset management platform, will manage the deal. It will be used for financing and be held off balance sheet. ARCap Servicing is the deal's primary and special servicer, and will buy nearly all of the below-investment-grade collateral and some 65% of its equity. Nomura will retain the remaining equity. Nomura's commercial real estate finance group was formed in 2001 and originates and securitizes fixed and floating-rate commercial mortgage loans, B notes and mezzanine loans.
Korea's Financial Supervisory Service announced last week it would revamp its rules regarding ABS in an effort to expand corporate funding channels and capital markets efficiency. ABS sales in the country fell to $24.7 billion last year, a 20% decline from 2005 levels and a 50% drop from a peak reached in 2001. The country's FSA imposed more stringent regulations on the sector following overzealous credit card ABS issuance in the country after a credit crisis in 2003. According to news reports, the FSA hinted at deregulating the ABS market, and may consider permitting securitization of derivative futures and option contracts.
Wachovia Corp. asset management arm Evergreen Investments last week completed its acquisition of a majority interest in European Credit Management Ltd., a London-based firm with $26 billion in assets. The firm specializes in ABS, European emerging markets, corporate bonds and leveraged loans. The combined entity has $300 billion in assets under management and offices in nine countries. The partnership is part of Wachovia's plan to beef up its Evergreen asset management business through a broader array of investment options and a global distribution platform.
Fitch Ratings last week downgraded nearly $60 million of Aegis Mortgage Corp. home-equity ABS bonds and placed $84.3 million of these bonds on rating watch negative.
Seneca Capital Management LLC announced last week that it has become SCM Advisors LLC, a change that the firm believes better reflects the evolution of its growth, diversity and scope of investment offerings. The company has continued to expand beyond its traditional core products to offer an array of alternative fixed-income and equity solutions, including structured products, new growth equity products and a recently launched full discretion fund.
The American Securitization Forum is holding ASF 2008 in the Venetian Hotel in Las Vegas. The Association aims to attract 7,000 attendees for next year's meeting, which will start on Super Bowl Sunday, Feb. 3. According to ASF officials, the final registration number for this year's conference is 6,700.
Credit Suisse appointed Paul Griffiths as managing director and head of fixed income for asset management. Griffiths, who was with AXA Investment Managers as global head of fixed income and chief executive officer of its U.K. business, replaces Dennis Schaney, who is retiring. In his new role at Credit Suisse, Griffiths will set and implement the business strategy for asset management's global fixed income business. Griffiths will be based in London and will report to David Blumer, chief executive officer of asset management at Credit Suisse.
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