Anxious investors holding RMBS and CDO assets are now expressing their fears in the ABCP sector, according to market sources. Late last week, word circulated that ABCP conduits administered by American Home Mortgage Investment Corp. and Aladdin Capital Management, among others were having trouble rolling new commercial paper, further arresting the flow of liquidity to an already floundering market. American Home Mortgage administers Broadhollow Funding LLC, a single-seller vehicle with about $5 billion in ABCP outstanding, according to one market source. Both of Aladdin Capital's vehicles, Altius Funding and Citius Funding buy CDOs. All of these vehicles are partially supported, which means that they rely on the value of the underlying assets to some extent for liquidity support. In such an illiquid environment, where all but the most seasoned investors are fretfully holding onto their cash, the inability to sell RMBS and CDO assets could spell big trouble for administrators and dealers. "CP everywhere is having a problem," said one investor. "Anything that funds mortgages, CDOs, synthetics - investors are just saying they do not want it anymore. The dealers end up stuck with it." By press time last week, neither American Home Mortgage nor Aladdin was available for comment.
Barclays Capital recruited Sharon Greenberg for its RMBS research