Bank of America said it will centralize its ABS platform in the U.S. The
decision was made to ensure that the businesses are focused on the clients and their needs, and are sized properly in view of market conditions to present a stronger platform for future growth, said Melissa Kitlowski, a spokeswoman for the bank. Last week the bank said it would be eliminating 650 positions within its global markets and investments division. While the bank would not break out that number by line of business, city or product area, the EMEA ABS origination team has been affected by the changes, Kitlowski said. There were no changes made to the London-based real estate structured finance team or to the London-based ABS trading and syndication groups, she said.
Both Societe Generale and Citigroup have closed down their Australia-based securitization business, according to published reports. The 17 members of SocGen's Australian securitization team are expected to be reassigned to other areas within the bank, specifically to trading, leverage and acquisition finance, as well as to project finance, including oil and gas activities. Citigroup has also reshuffled its securitization operations in the region. Services to the bank's Australian clients will now be headed out of Asia by Cristina Chang, who is based in Hong Kong. Douglas Banks, former head of the securitization at Citigroup in Sydney, is said to have left the bank earlier last week.
After suffering heavy losses in the U.S. subprime market and hoping to reduce proprietary risk-taking, UBS is revamping its investment banking group, according to market sources. The move will likely entail job cuts in the investment bank's real estate and securitization groups, whose rosters hit peak numbers last August. UBS is also expected to move its troubled mortgage investments into a separate restructuring unit.
Fitch Ratings has made three new appointments to its global structured finance team. Ian Linnell will replace Huxley Somerville as head of EMEA Structured Finance. Somerville is returning to the agency's New York office to focus on strategic and operational initiatives. The agency has yet to name a replacement for Linnell as head of EMEA banking. John Olert will head global structured credit and Philip McDuell will head structured credit for EMEA and Asia-Pacific. Olert and Linnell will report to Paul Taylor, who is the group's managing director and head of global structured finance. McDuell will report to Olert. Additionally, Managing Director Stuart Jennings will lead the newly formed EMEA structured finance special projects and research group. Jennings was previously head of EMEA RMBS. Senior Director Gregg Kohansky will now assume that position. Among other changes in EMEA at the rating agency are the combination of the EMEA performance analytics teams for ABS, CMBS and RMBS into one surveillance group. The teams will now report to Managing Director Rodney Pelletier. The EMEA CMBS team, which will be managed by Managing Director Andrew Currie, also reports to Pelletier. Jennings and Pelletier will all report to Linnell.
In the U.S., the rating agency has recently folded its credit derivative-focused platform Derivative Fitch back into its umbrella organization Fitch Ratings. Fitch said that this move is an effort to better delineate its product platform, operating as Fitch Solutions, from its ratings platform, operating as Fitch Ratings.
Dewey & LeBoeuf has hired Joseph Topolski in the firm's Charlotte, N.C. office as a partner in the structured finance department. Topolski's practice will focus on securitizations and other structured finance deals involving a broad range of asset classes. He joins Dewey & LeBoeuf from the office of the general counsel of Ford Motor Credit Co., where he was a senior member of the global structured finance group and worked on the auto firm's securitization programs in the U.S., Canada, Europe and Asia. Before joining Ford Motor, Topolski was an associate in the structured finance group of Dewey Ballantine's New York office.
Last week Credit Suisse analysts released a report that reiterated their "underperform" ratings on Fannie Mae and Freddie Mac. Analysts estimate that Freddie Mac might have to recognize a write-down of between $8 billion and $11 billion, or roughly $8 to $11 per share in 4Q07, which reflects the considerable valuation declines in the 2006 and 2007 ABX AAA' tranches. These unrealized losses are equivalent to a 30% to 40% hit to the GSE's book value of $27.36 as of Sept. 30, Credit Suisse analysts said. Analysts estimate that Freddie Mac lost $3.80 per share in the fourth quarter, and that Freddie Mac's common book value could dip to a range of about $15 to $20 per share. This does not include possible impairments on its Alt-A portfolio. Analysts also project that Fannie Mae could possibly recognize an impairment of $2.25 billion to $5 billion in 4Q07, or a 5% to 10% hit to the company's book value of $31.74. Combined with Credit Suisse's projected loss for the agency of $2.45 per share in 4Q07, Fannie Mae's book value could drop to a level of $22 to $25 per share.
Beleaguered bond insurer ACA Capital Holdings said last week that it has gained another month from its counterparties to unwind a projected $69 billion of credit exposure resulting from the subprime crisis. The firm's bond insurance unit, ACA Financial Guaranty, said it extended an agreement with its trading partners, including Merrill Lynch and Credit Agricole, to waive collateral requirements, termination rights and policy claims related to ACA Financial's credit rating through Feb 19. An earlier agreement expired on Jan 18. Last month, Standard & Poor's cut ACA's financial strength rating 12 notches to CCC' from A'. In a statement, the firm said it is working "to develop a permanent solution to stabilize its capital position" and avoid the company's collapse.
National City Corp. last week confirmed a big loss in 4Q07 that was driven by the current mortgage sector woes. The firm lost $333 million, which is equivalent to 53 cents a share last quarter, compared with a profit of $842 million, or $1.36 per share, in the 4Q06 when National City sold its First Franklin mortgage business. The sale resulted in a gain of $622 million, or $1 per share. The Cleveland-based bank reported full-year earnings of $314 million, or 51 cents per diluted share. By contrast, it earned $2.3 billion, or $3.72 per diluted share, the prior year. Meanwhile, KeyCorp said last week that its fourth-quarter earnings fell 83%, and these losses are closely tied to greater loan charge-offs in its commercial real-estate portfolio. The firm's net income reached $25 million, or six cents per share, in 4Q07 - versus $146 million, or 36 cents per share, in 4Q06.
Security Capital Assurance said last week that it will not raise new capital at this time because of current market conditions, despite pressures from Fitch Ratings to procure $2 billion. SCA is still pursuing the other elements of its capital plan, such as coming up with capital via reinsurance arrangements as well as restructuring certain insured obligations. "The unprecedented uncertainty and instability affecting our industry make it impractical to consider raising new capital at the present time," said Paul Giordano, president and CEO of SCA. "Pending greater clarity, we intend to continue pursuing the other components of our capital plan and consider all options available to us."
The Loan Market Associa-tion committee (LMA) has produced a specification paper on best practice guidelines for primary and secondary settlement in the European market, according to Standard & Poor's LCD service. Banks, investor institutions and system vendors are set to discuss potential settlement solutions. A number of providers - ClearPar, TSI, Euroclear - are reportedly keen to participate in the initiative, in an effort to imitate the already established U.S. system. One of the more appealing features of this system is the use of ISINs and CUSIPs to get the marketplace more familiar with various types of securities.
Last week, Bank of America and Wachovia announced that their earnings dropped after they wrote down a combined $6 billion of mortgage loans and securities. BofA's profits fell 95% while Wachovia's dropped 98%. These numbers were disclosed last Tuesday. BofA had net income of $268 million, or five cents a share, compared with $5.3 billion, or $1.16, the previous year. Revenue fell 31% to $12.7 billion. Despite the dismal numbers, as well as a $4.1 billion bet in purchasing Countrywide Financial, BofA estimates that earnings in 2008 will be well above $4 a share, assuming that a market disruption like that seen in 2007 does not occur. Meanwhile, Wachovia disclosed that 4Q07 profit fell to $51 million, or three cents per share, from $2.3 billion, or $1.20 per share, a year ago. Without merger-related expenses, Wachovia earned $160 million, or eight cents per share. The firm took a $1.7 billion write-down in the fourth quarter.
Financial Security Assu-rance had its AAA' rating affirmed by Fitch Ratings last week. The company currently has a stable outlook. Both Moody's Investors Service and Standard & Poor's also recently affirmed the bond insurer's 'AAA' rating and FSA is now the only major financial guarantor with AAA' ratings and stable outlooks from the three rating agencies. The motivation behind the rating affirmation came from the fact that FSA has a significantly lower direct exposure to subprime mortgage credit risk compared to its largest competitors, Fitch said. This is the result of its avoidance of ABS CDOs and CDOs of CDOs, the company said. FSA noted that it is currently well-positioned to take advantage of opportunities in the municipal bond market. At the same time, widening credit spreads are creating strong opportunities for the company to insure transactions with significantly improved credit terms and attractive pricing across all of its markets, the company said.
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