Brian Brennan, who headed Merrill Lynch's home loan trading business, has left the company. The investment bank did not confirm the departure, but reliable market sources said Brennan left his position to join a hedge fund based in Greenwich, Conn. The name of that hedge fund was not known at press time.
Lloyds TSB announced its new securitized products group that will report to Kate Grant, director of the bank's debt capital markets. In October last year, Lloyds announced that it would be undertaking a review of its securitization and structured credit business, following the departure of Mark Escott, the bank's head of securitization. "The new internal structure will allow us to better organize ourselves to fit the changing external market," a spokesperson at the bank said. "We continue to build on our established origination, management and distribution strategy to support our clients' securitization needs as well as our own balance sheet management strategy."
Najib Canaan has joined GSO Capital Partners as managing director. Before joining GSO, Canaan was the head of ABS at Brevan Howard since May 2007. Prior to that, he was executive managing director and head of fixed income at Nomura Securities International.
Eurohypo has appointed Bill Lindsay as managing director, head of credit risk management in the U.K. Lindsay joins the commercial real estate bank from Barclays, where he began and developed his career, holding various roles including lending director and property policy director for Barclays corporate banking. Most recently, the new appointee was the director and regional chief credit officer of Barclays capital global financial risk management, where he was responsible for credit sanctioning at the most senior level across a range of sectors in the U.K. and Europe and specialized in property financing, including assets for securitization programs.
Massachusetts Mutual Life Insurance Co. elected two new board members, including former Standard & Poor's President Kathleen Corbet. Corbet left S&P last September to "pursue other opportunities" after her more than three-year stint that began in April 2004. Before S&P, Corbet was the chief executive offer of Alliance Capital Management Holdings' fixed-income division. McGraw-Hill Co. executive Deven Sharma replaced Corbet after she left the rating agency (ASR, 9/10/07). The other board of director appointed is Raymond LeBoeuf, former chairman and chief executive of PPG Industries. He retired as chairman and CEO of the company in July 2005, as reported by ASR sister publication American Banker.
Keefe, Bruyette & Woods has promoted Frederick Cannon to the newly created positions of associate director of research and chief equity strategist. Cannon joined Keefe Bruyette in 2003, providing equity research on banks and thrifts with a specialization in the mortgage sector. His coverage includes Countrywide Financial, Fannie Mae, Freddie Mac, Washington Mutual and Wells Fargo. In his new role, Cannon will be responsible for identifying and analyzing important trends in the financial services sector as well as helping manage Keefe Bruyette's overall research product.
Fitch Ratings withdrew its ratings on seven classes of notes that made up Visage II, a hybrid CDO referencing a static portfolio of mezzanine, high-grade and commercial real estate ABS CDOs and RMBS. The deal had hit an event of default under condition 11 of its notes and was liquidated. The initial portfolio was selected by TCW Investment Management Co. Credit Suisse served as the deal's total return swap counterparty.
In a JPMorgan Securities 2008 global client survey, the bank found that 33% of those clients polled expected the CLO market to restart in Q308, while 32% believed it would come back in 2009. Over the next 12 months, 38% of respondents said they were looking to maintain their CLO exposure, while 18% said they were looking to add. Ten percent of respondents said they were looking to reduce their exposure by under 20%, while 7% said they were looking to reduce their exposure by more than 20%.
IndyMac Bancorp announced its first full-year loss in its 23 years as a mortgage lender. The holding company for IndyMac reported a fourth-quarter loss as a result of housing market weakness that pushed the mortgage firm to boost its loan-loss provisions. The holding company for IndyMac Bank said that it recorded a $509.1 million loss, equivalent to $6.43 per share for the quarter ending Dec. 31. This compares with a profit of $72.2 million, or 97 cents per share, in the same time period a year before. IndyMac shares plummeted over 11%, or 86 cents, to $6.74 in premarket trading last Tuesday, according to published reports. For the year, the Pasadena, Calif.-based firm posted a loss of $614.8 million, equivalent to $8.28 per share, compared with a profit of $342.9 million, or $4.82 per share, in 2006. Net revenue in 2007 was down significantly to $3.6 million from $1.3 billion in 2006. The company's credit costs escalated to $863 million during the quarter, increasing from $46 million from the prior year. At the quarter's close, credit reserves for future losses reached $2.4 billion, up 71% from $619 million a year earlier. IndyMac suffered $179 million in write-offs in the fourth quarter, although the mortgage firm said that it expects its credit reserves to be enough to absorb a significant rise in charge-offs in 2008.
Assured Guaranty reported a net loss of $260.1 million, or $3.77 per diluted share, for the fourth quarter 2007. The loss was primarily the result of an after-tax unrealized mark-to-market loss on derivatives of $297.5 million, which included a loss of $302.9 million on financial guaranties written in credit default swaps and a $5.4 million after-tax unrealized gain on Assured Guaranty Corp.'s committed capital securities. Operating income for fourth quarter 2007 was $37 million, down 11% from $41.5 million in the fourth quarter 2006. The company maintained that it is one of the only two financial guaranty companies with stable triple-A ratings from the three major credit rating agencies and is continuing to write business and grow its franchise, particularly in the U.S. Public Finance sector.
American International Group (AIG) reported in a regulatory filing last week that as of last Dec. 31, that the company had a material weakness in internal controls related to the valuation of the firm's super-senior credit derivative portfolio, according to an independent auditor. The insurance company said that its auditor had identified "material weakness" in the way it determines the value of its credit derivatives portfolio. In response, Fitch Ratings placed AIG's Issuer Default Rating, holding company ratings and subsidiary debt ratings, including International Lease Finance and American General Finance, on Rating Watch Negative. AIG said that the gross market value of its credit derivatives portfolio fell by $4.9 billion last October and November. The latest projection exceeds by four times the $1.1 billion that executives had estimated in December, and this figure will probably increase when December's losses are considered. Despite the negative market response to the announcement, Morgan Stanley equity analyst Nigel Dally said, "the stock price reaction has been overdone." However, Dally acknowledged that the mark-to-market losses imply that there is potential for considerable realized losses in the future. "The concerns raised by the independent auditors over AIG's ability to accurately value these exposures add further uncertainty. Further, we now expect management to take a more cautious stance in repurchasing stock."
MGIC Investment Corp. posted a $1.47 billion loss in Q407. The net loss for the full year of 2007 was $1.67 billion, compared with net income of $564.7 million for the year prior. Losses for the fourth quarter were at $1.35 billion, up from $187.3 million in Q406. The company announced that it has retained an advisor to assist it in exploring alternatives for increasing its capital. The company said that given the company's expectations for further losses, it does not expect to see net income in 2008. However, MGIC maintains that it has sufficient capital to meet claim obligations and is currently benefiting from higher loan persistency, increased use of mortgage insurance, higher premiums for certain segments of business and improved credit standards.
Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson told the Senate Banking Committee on Feb. 14 that the U.S. economy will see "sluggish" growth over the next several months, with a faster rebound later in the year. "At present, my baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year as the effects of monetary and fiscal stimulus begin to be felt," Bernanke said. While both men acknowledged the challenges facing the economy - including a worsening job market, housing price depreciation and high energy prices - neither believes that a recession will occur this year. Bernanke predicts additional losses tied to subprime investments will be reported from the major banks, but maintains they all have sufficient capital to avoid a major collapse. The modest growth predicted for the economy this year seemed to deviate somewhat from Paulson's assessment of the market at a press conference on Tuesday when he said, "The worst is just beginning."
American Home Mortgage said it will begin using reverse mortgages to help those who are 62 years of age and older to buy newly constructed homes. The company will employ its Beacon Reverse division to carry out the plans, which will allow borrowers to finance these homes without taking on any future monthly loan payments. "Reverse mortgages are ideal for seniors looking to buy down without using all of the proceeds from the sale of their previous home, or buy up without the large payments that a traditional mortgage might carry," American Home Mortgage's Chief Executive Offiver, James Deitch said in a release. The company noted that many seniors are attracted to the idea of moving into newly built homes with access to golf, entertainment, and communal activities, as evidenced by the growth of these adult and senior communities.
CompuCredit had a net loss of $51 million and a loss per share of $1.04 in 2007. This compares with net income of $107.5 million and earnings of $2.14 a share in 2006. During 4Q07, the firm stopped the operation of its 105 retail micro-loan branches in six states, its stored value card operations, its Web-based installment loan operations and operations under which it bought and serviced motorcycle, all-terrain vehicle and personal watercraft loans through and for pre-qualified networks of dealers.
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