Luminent Mortgage Capital sold off the assets financed by its ABCP program, eliminating all of its outstanding commercial paper liabilities. The firm has also repaid all of its warehouse lines of credit that were used to finance whole-loan purchases and has similarly eliminated all balances outstanding under its warehouse lines of credit. Luminent has also entered into an amended and restated definitive credit agreement with Arco Capital Corp., providing Luminent with a revolving liquidity line of credit of up to $60 million. As reported in the Sept. 10 issue of ASR, the firm has reduced expenses by laying off personnel. It expects to close its San Francisco office by year's end.
AmBank, a subsidiary of AMMB Holdings, is expected to securitize two tranches of nonperforming loans (NPLs), according to published reports. The company plans to sell a tranche of corporate NPLs to Neptune ABS One and a tranche of retail NPLs to Neptune ABS Two, which are the special purpose vehicles (SPVs) formed exclusively for the proposed securitization of corporate and retail NPLs. Bank Negara Malaysia approved the proposed deal, which will allow AmBank to reduce its NPL ratio to be in line with the industry average.
Basis Capital, the Australian hedge fund manager, is proposing to break up its Pac-Rim Opportunity product, which has already shed 50% of its value. This was done so that the Asian investments that are still performing well could be protected from the effects of the deterioration of U.S. subprime mortgages, which has already hit the fund's structured credit assets.
A considerable amount of U.S. securities purchased by foreign investors, primarily Asian buyers, have had a powerful and beneficial impact on the U.S. housing market, according to a recent Mortgage Bankers Association study. The report, "The Impact of Global Capital Flows and Foreign Financing on U.S. Mortgage and Treasury Interest Rates," reported that international demand for U.S. debt had a material impact in lowering overall interest rates. Specifically, Chinese demand for mortgage-related debt lowered U.S. mortgage rates by roughly half of a percentage point. Key findings from the study assert that foreign investors currently hold almost 45% of all U.S. Treasury securities and more than 20% of all U.S. agency securities (including bonds and MBS). The study also found that if foreign investors redeployed out of MBS, the impact on U.S. interest rates would probably be slight, but only if the switch were into another type of dollar-denominated asset. The MBA added, however, that if foreign investors sold dollar assets and bought assets denominated in euros or yuan, U.S. Treasury interest rates would likely increase by 50 basis points or more, the MBA said.
PMI Mortgage Insurance Co. appointed Dan Nicoll as vice president of government sponsored enterprises. Nicoll will oversee relationship management with the GSEs and these agencies' structured finance, credit management and marketing teams. Jim Wagner is still the insurance firm's senior vice president of government-sponsored enterprises. Nicoll previously worked for Fannie Mae, where he started his career in 1989 as director of product development. During his tenure there, Nicoll managed Fannie Mae's mortgage insurance affiliations, in which time he developed relationships with PMI's executive leadership team.
J.G. Wentworth completed a $99.5 million securitization of structured settlement and annuity-backed notes. The deal is the specialty finance company's 16th securitization and its seventh since launching its quarterly securitization program. In 2006, J.G. Wentworth's total securitization volume was $319 million. The third quarter 2007 securitization showed a rise in structured settlements and investment annuities.
Litton Loan Servicing was the target of buyout chatter last week, as the financial market circulated rumors regarding a potential deal with either Goldman Sachs or Fannie Mae. The firms were said to be the top bidders for the Houston-based residential loan-servicing unit of C-BASS, according to ASR's sister publication The American Banker, which broke the news. Both Fannie Mae and Goldman Sachs deny the reports. However on August 3, 2007, C-BASS announced that it retained The Blackstone Group as financial advisor to assist the company in obtaining a more permanent liquidity source. The announcement fueled talk of potential buyout suitors, sources said. Also fueling these rumors was the recent completion of the partial sale of Sherman Financial by parent companies MGIC and Radian Group, which also owns C-BASS. While the proceeds from the sale will have positive implications for their GAAP equity, Friedman, Billings, Ramsey & Co. analyst Steve Stelmach said in a recent report, their tangible book value will take a hit from their C-Bass write downs. Calls to C-BASS spokeswoman Lisa Brzezinski were not returned by press time.
While layoffs are spreading in some pockets of structured finance, the emerging markets appear to be holding firm. Citigroup's business in the ex-Soviet Union is a case in a point. The bank, which has arranged a ruble-denominated RMBS for the Agency for Housing Mortgage Lending (AHML), recently hired Asseneta Deliiska, whose responsibilities will include originating and structuring transactions in the ex- Soviet Union. More generally, Deliiska will cover EMEA structuring. Deliiska hails from Goldman Sachs, where she focused on mortgage securitization in such areas as non-performing, re-performing, Alt-A, prime and option ARMs. More recently, she moved into exploring ABS and MBS potential in Russia. Deliiska is fluent in Russian.
Last Monday, the Loan Syndi-cations and Trading As-sociation (LSTA) released a user's guide to the Physical Settlement Rider for loan credit default swaps and LCDX. The guide explains key terms and concepts introduced by the rider and is intended to assist counterparties and legal counsel in implementing settlement techniques following a credit event in the LCDS or LCDX market.
The Physical Settlement Rider is part of a package of documents and procedures created and established by the LSTA, the International Swaps and Derivatives Association and an independent working group of market participants. Their goal is to come up with a standard process for efficiently settling swaps on the occurrence of a triggering default.
J.C. Flowers & Co., head of the investment group involved in ongoing negotiations to buy out SLM Corp., known as Sallie Mae, lowered its bid for the company last week. In a letter to SLM, the group offered $50 per share of Sallie Mae, with a payout of up to an additional $10 per share. Also, if the student lender's performance meets or exceeds its own projections, then the warrants could result in a payout of $7 per share, or as much as $10 per share, according to a statement from the Flowers firm.
Fitch Ratings will conduct a CDO performance review of all structured finance CDO asset managers to which it has assigned a 'CAM' rating. The rating agency said that its normal CDO surveillance practices, which include a dialogue with each manager regarding their portfolio performance, will continue to apply to both rated and nonrated CDO asset managers. At the same time, the additional review will provide a consistent framework for evaluating managers' performance at this point in the credit cycle, the rating agency said. The reviews are expected to be completed within the next 45 days, whereupon Fitch will announce updated ratings decisions.
Managers that will be evaluated include BlackRock, Cairn Financial Products, Collineo Asset Management, Declaration Management and Research, Duke Funding Management, E*TRADE Global Asset Management, Faxtor Securities, GE Asset Management, GSC Partners, Gulf International Bank, Omicron Investment Management, Pacific Investment Management Company, Prudential M&G, Rabobank, Redwood Trust, Solent Capital, Trainor Wortham, Trust Company of the West, UNIQA Alternative Investments, Vertical Capital and Western Asset Management.
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