JPMorgan chase might be buying Bear Stearns' stock at a fire sale price, but the company might have to pony up a bit more to keep its MBS traders. Last week Paul Van Lingen and Scott Eichel, both senior managing directors, and Joseph Steffa all accepted offers at RBS Greenwich Capital, according to people familiar with the situation. RBS is trying to replenish its MBS trading operations after a stream of traders left the company last month for various firms, including Jefferies & Co. JPMorgan wants to hold onto as many Bear Stearns staff as possible, especially because the latter has extensive sales contacts for esoteric and agency CMO products, said people familiar with both companies. Keeping Bear traders would make it easier to retain those accounts.
According to an S-4 Securities and Exchange Commission filing dated April 23, JPMorgan Chase has made an oral agreement with Jeffrey Mayer, executive vice president and senior managing director at Bear Stearns, to employ him upon the completion of the merger of the two investment banks. At JPMorgan, Mayer will serve as a vice chairman focusing on global markets. Mayer will receive an annual salary of $250,000 plus a bonus compensation of $12 million for 2008, payable in a mix of cash and restricted stock units, said the SEC filing. Mayer will also get a grant of restricted stock equal to $15 million, which will vest 50% on or about each of the second and third anniversaries of the grant date as well as the shares of JPMorgan Chase common stock that will be distributed upon vesting. Mayer is still in discussions with JPMorgan Chase regarding the terms of his employment, according to the SEC filing.
Jefferies & Co. is expanding its MBS group, adding 10 senior professionals to its mortgage trading team over the next several weeks, the bank said last week. Managing Directors William Jennings and Johan Eveland will lead the group. Jennings is expected to join the firm in June, after most recently serving as a managing director in the mortgage sales division of RBS Greenwich Capital. Eveland, who has already started at Jefferies, was a managing director and co-head of agency and nonagency MBS trading at RBS Greenwich. The Royal Bank of Scotland Group, the parent company of RBS Greenwich, said earlier this month that it would cut 200 staffers, largely in the bank's securitization, leveraged finance and real estate lending areas.
Residential Capital (ResCap), an indirect wholly owned subsidiary of GMAC Financial Services, has appointed Thomas Marano, former senior managing director and global head of MBS and ABS at Bear Stearns, to serve as ResCap's non-executive chairman of the board of directors. Marano succeeds former chairman Michael Rossi. As announced previously, Rossi resigned from the board effective March 17 because of medical reasons. In addition to joining the ResCap board, Marano has been appointed to the board's executive committee, where he will serve with ResCap's Chief Executive Officer Jim Jones. Additionally, ResCap said Joshua Weintraub, a former senior managing director with Bear Stearns' global mortgage operations, as well as James Young, ResCap's chief financial officer, were elected to its board. Both Marano and Weintraub also were named to the board's executive committee. The new board members will replace departed members Eric Feldstein, Sanjiv Khattri and Paul Bossidy, the mortgage company said. ResCap is looking for two more independent directors to replace Thomas Jacob and Thomas Melzer, who both left its board earlier this week.
ING Real Estate appointed Emmanuel Verhoosel as global head of structured products finance and CEO of Finance Americas. Verhoosel will be based in London and head up the firm's global finance products team. He will also oversee ING Real Estate's lending business in the Americas and will focus on the relationship management for global clients. Verhoosel reports to Hein Brand, CEO of ING Real Estate. Verhoosel joins from JPMorgan, where he had worked since 1994 as regional head and senior client executive of the bank's real estate structured finance group in London. At this position, he worked on structured finance transactions, including CDOs, CLOs, RMBS and CMBS.
Archibald Cox, Jr., was appointed chairman of Barclays Americas, a region in which the company hopes to build its position in its investment banking and investment management businesses. Cox will start his new job in early May. He will report to Barclays President Robert Diamond, Jr., and will also serve on Barclays' IBIM executive committee. Cox's financial industry expertise goes back to 1964, when he joined Morgan Stanley and assumed responsibility for all equity sales and trading. Before joining Barclays, Cox was president and CEO of Magnequench, a manufacturer of rare earth magnetic material and magnets.
Springfield and Boston, Mass.- based Babson Capital Management has acquired Murray Capital Mana-gement (MCM), a distressed debt and special situations management outfit based in New York. The purchase marks Babson Capital's third acquisition in six years. Babson Capital acquired its Charlotte-based U.S. bank loan team from Wachovia Corp. in 2002 and its London-based European bank loan business Babson Capital Europe from Duke Street Capital in 2004. Marti Murray, MCM's current president, portfolio manager and senior research analyst and her team will join Babson Capital and will report to Cliff Noreen, head of Babson Capital's corporate securities division and vice chairman of the firm.
Fitch Ratings has updated its guide for investors looking to buy European ABCP in this challenging environment. The rating agency said the European liquidity crisis has seen investors shy away from ABCP in the midst of uncertainty regarding the sector. The report looks at the different ABCP vehicles an investor might encounter and answers many questions that buyers might ask in considering buying ABCP. Fitch's report is titled Getting Started in ABCP in Europe in the Present Climate - An Updated Investor Guide. It updates the rating agency's report called Getting Started in ABCP in Europe - An Investor Guide published in November 2005.
JPMorgan Chase announced that it has commenced a tender offer to buy any and all of the outstanding student loan ABS auction-rate notes of each of the following securitization trusts of the Collegiate Funding trusts: Collegiate Funding Services Education Loan Trust 2003-A, Collegiate Funding Services Education Loan Trust 2003-B and Collegiate Funding Services Education Loan Trust 2004-A. The offer will expire at 5 p.m. on May 20 unless extended or terminated earlier. Tenders of the auction-rate notes might be made at any time prior to the expiration of the offer, said a release from JPMorgan. Any registered owner who validly tenders any or all of his or her auction-rate notes by the deadline will receive $1,000 for each $1,000 principal amount of the auction-rate notes validly tendered as well as accrued and unpaid interest from the last applicable distribution date to but not including, the settlement date, which is expected to be on May 21.
National City Corp. said Tuesday that Merrill Lynch has accused National City of breaching terms in the purchase agreement for Merrill's First Franklin Mortgage Co. unit. Merrill bought First Franklin from National City in 2006. In an 8-K filing with the Securities and Exchange Commission, Merrill claimed that National City breached conditions in the agreement involving alleged losses associated with First Franklin's claimed repurchase of loans. In related news, last Monday National City received a $7 billion capital infusion from private equity firm Corsair Capital and other investors to prevent the sale of the bank.
Existing home sales for March declined 2% to a 4.93 million annual rate,
as reported by the National Association of Realtors last week. The median home price was $200,700 compared with $217,400 in March 2007, equivalent to a 7.7% drop. Sales were down in the Midwest and South, and higher in the Northeast and West. NAR Chief Economist Lawrence Yun noted that while mortgage rates are attractive, borrowers face more restrictive lending practices - even prime borrowers - which is contributing to the weakness in the housing market.
Morgan Stanley announced that it raised an additional $2.5 billion of equity commitments for its Special Situations Fund III, bringing the current total to $5.9 billion. The fund is open-ended, and will primarily invest in global real estate securities in emerging, developed and distressed markets. Meanwhile, Morgan Stanley will also invest 20% in U.S. commercial mortgage debt, in particular junior pieces of first mortgages where the interest expenses are covered by the lease in place. As of the end of 2007, the fund had invested approximately $4.8 billion of equity, with 62 closed investments in China, Australia, India, Russia, Poland, Brazil, Mexico, the U.S., Japan and Western Europe, among other areas. Notably, 63% of investments came from investors outside of the U.S.
Bank of America said it will drop the Countrywide Financial Corp. name once the bank completes the acquisition of the mortgage lender. The deal is expected to close in July. The bank also said it will no longer offer "option" adjustable-rate mortgages. Bank of America also said it plans to curtail stated income loans while also limiting prepayment penalties on interest-only and hybrid adjustable-rate mortgages.
ACA Capital Holdings, the parent of ACA Financial Guaranty Corp., entered into a fourth forbearance agreement with its counterparties to extend the forbearance agreement through 11:59 p.m. New York time on May 30, 2008. Under the agreement, the counterparties will waive all collateral posting requirements, termination rights and policy claims relating to the rating of ACA Financial Guaranty Corp.
Clarification
In the April 14 issue of ASR, the terms of the master agreement in a trade were misstated. The application by the pension plan for a minimum funding waiver, if the pension were concerned it would not meet its minimum fund requirement, should give the bank the right to terminate the trade in a master agreement.
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