Standard & Poor's last week lowered its ratings on 50 tranches from 12 U.S. cash flow and hybrid CDO of ABS deals. Forty-seven of these ratings had been on CreditWatch with negative implications before the downgrades. The rating agency removed the ratings assigned to these tranches from CreditWatch. The rating on an additional class from one of these transactions is still on CreditWatch with negative implications. Aside from this, S&P affirmed its ratings on another 19 tranches from six CDO of ABS deals and removed them from CreditWatch with negative implications. The 50 downgraded tranches is worth $2.312 billion; the 19 tranches with ratings affirmed at their current levels and removed from CreditWatch negative represent an issuance amount of $692.6 million. All of the affected CDO transactions are backed partly by mezzanine tranches of U.S. RMBS backed by first-lien subprime mortgage collateral.
BNP Paribas hired Vlad Galea as its new head of emerging markets
structuring in Europe. Galea, who is based in London, will be covering all fixed-income asset classes, which include interest rates, foreign exchange, inflation and credit. He started in early August and reports to Kara Lemont, European head of foreign exchange and interest-rate structuring. The new hire also reports to Herve Besnard, head of credit derivative structuring. Galea joins from JPMorgan Securities in London, where he was most recently in the emerging market structuring and marketing team and worked on structured credit and alternative investments. Galea was involved in the launch of Red Square, the first ruble-denominated CDO, launched in December 2006.
Lewtan Technologies appointed Don Coffman as vice president of professional services. Meanwhile, Paul Arvidson became senior vice president for sales and services. Coffman will be responsible for leading the Professional Services organization in ensuring customer satisfaction with the consulting and implementation of Lewtan products. He joins Lewtan from Dell, where he served as director of financial services consulting, with responsibility for engagement management, leadership, client relationship management and systems-integration initiatives.
Mortgage Bankers Associa-tion (MBA) appointed Jan Sternin as senior vice president of its commercial/multifamily group. The new hire takes over from Gail Davis Cardwell. In her new position, Sternin will manage the commercial/multifamily group and will be directly responsible for the development and implementation of regulatory policy, best practices and industry standards for the commercial/multifamily sector, the MBA said. Sternin will also serve as liaison to MBA's commercial/multifamily membership, the association said. Sternin was previously senior vice president of Midland Loan Services, where she oversaw marketing and sales for Midland's commercial loan servicing, asset management and advisory services to institutional and private investors in the U.S. and internationally. She has also worked at Resolution Trust Corp., Federal Deposit Insurance Corp., Office of Thrift Supervision, Federal Home Loan Bank and Federal Savings and Loan Corp. in the valuation, restructure, and liquidation of troubled assets and insolvent institutions.
Markit recently launched its enhanced ABX Calculator, which allows clients to understand the impact that credit scenarios can have on ABX index trading and to assess the value of their own synthetic ABS positions, the company said. The firm added that the enhancement was a response to the increased focus on the synthetic ABS market over the past several months. The ABX calculator's new functions provide users with the ability to add index-level credit assumptions and project cash flows for each constituent deal underlying the ABX indices, which includes functionality for determining the cumulative default rate of collateral by including annual collateral default rates in calculations, the company said. The addition also allows users to input the percentage of losses on defaulted collateral, use proprietary delinquency percentages and run historical scenarios to calculate values for backdated trades.
Derivative Fitch revised its methodology for rating SF CDOs, effective immediately. The new ratings will increase by 25% the assumed default probability for U.S. subprime bonds issued since 2005. For U.S. subprime bonds on rating watch negative, Fitch will assume a three-subcategory downward rating adjustment for purposes of the rating definition used in their default Vector model. Fitch will also take into account additional risk factors, such as those affecting recently issued subprime RMBS, Alt-A, closed-end second-lien RMBS, and those that overlap with other SF CDOs as collateral, which may further increase the 25% default probability adjustment or modify modeling assumptions, the rating agency said. Additionally, Fitch stressed that rating decisions are not purely model-driven, with the ultimate rating outcome dependent on the credit committee's evaluation.
BNP Paribas's creditor exposure to U.S. mortgage lender Homebanc stands at 30 million($40.2 million), the French firm disclosed. Homebanc filed for Chapter 11 bankruptcy protection on Aug. 9 in the midst of the current subprime meltdown. However, representatives from the company said that BNP's exposure to Homebanc is not that significant. Previously, BNP froze three of its investment funds, noting that the lack of liquidity in some parts of the U.S. securitization market made it hard to value certain assets.
Sentinel Management Group halted client withdrawals for fear that it would not be able to meet considerable redemption requests without selling securities at deep discounts to their fair value. The firm stated that credit-market turmoil made it impossible to trade without incurring losses. Later last week, the Illinois-based cash management firm reportedly froze its clients' assets.
Thornburg Mortgage last Tuesday delayed payment of its common stock dividend after liquidity concerns resulted in a 47% drop in its share price. The company specializes in high-quality prime jumbo mortgages. There are concerns it might have to sell assets because of the liquidity squeeze resulting from the tightening in credit lines as well as the current crisis in the ABCP and repo markets. Meanwhile, Moody's Investors Service placed the secured liquidity notes issued by Thornburg, which are currently rated Prime-1, on watch for possible downgrade.
Aegis Mortgage Corp. filed for bankruptcy in Delaware last Monday. Houston-based Aegis and affiliated companies said that significant changes in market conditions, aside from the quick drop in the secondary mortgage market, severely affected its operations and led to this filing. In its bankruptcy filing, Aegis disclosed that it owes Morgan Stanley, its largest unsecured creditor, nearly $16 million. Furthermore, it listed 34 other unsecured claims. Among the other creditors are Goldman Sachs, Deutsche Bank and Merrill Lynch. On Aug. 6, Aegis stopped originating loans. A day later, the firm let go 782 of its 1,302 employees. In a related development last Wednesday, Connecticut issued a cease and desist order making sure Aegis made no further loans in that state.
Standard & Poor's announced that its ratings on the Federal Home Loan Banks of Chicago (AA+'/Negative/A-1+') and Dallas (AAA'/Stable/A-1+') remain unchanged after the banks' joint announcement that they are in preliminary talks to evaluate the benefits and feasibility of combining their business operations. Analysts believe that a rating action would be premature at this time. If the banks ultimately are combined, S&P believes the rating would be either AAA'/A-1+'or AA+'/A-1+.' During 2001 to 2004, as a result of its diversification effort under the Mortgage Partnership Finance (MPF) program, FHLB-Chicago purchased a significant amount of mortgage loans from its member banks, $37 billion as of March 31, which is the highest of all the FHLBs.
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