Kevin Jenks has left his post at HBK Investments, the firm announced last week. Jenks was formerly a senior portfolio manager for the firm in ABS, MBS and CMBS. Jamiel Akhtar, a managing director who has been with HBK since 1993, will continue to oversee the company's collateral management activities and structured credit portfolio. Akhtar will be working with the other seven professionals who make up HBK's structured credit group. HBK Investment acts as collateral manager for eight Sandstone and Gemstone CDO funds combined.
EMC Mortgage Corp. has promoted Peter Muriungi to senior vice president. Muriungi is head of the firm's Financial Analytics and Structured Transactions (F.A.S.T.) and business information teams. Muriungi will play a senior role in managing all modeling and portfolio analytics as well management information systems for the Bear Stearns subsidiary. Muriungi joined EMC Mort-gage in 1999 as an analyst, mostly providing financial and default analytics. He formerly headed up the business analysis and design department within default operations.
Hillel Caplan was recently admitted as a partner in the securitization services group at Deloitte & Touche. Caplan is based in New York and is the global leader of Deloitte & Touche's CDO Suite practice, a software solution for collateral managers and trustees in the CDO market.
Calyon has created a new Hong Kong-based debt capital markets team for Asia,
which will be headed by Antoine Gros. The team will focus on products such as high yield bonds, high grade bonds, and flow and structured asset-backed securities. Gros, who started Sept. 1, has worked in other fixed-income market jobs at the investment bank's offices in Paris, London and New York, most recently heading up specialized asset securitization for the Americas, a job in which he oversaw origination and execution of structured transactions and asset-backed securities. Reporting to Gros will be Ralph Byun, an executive director who came from the DCM business in Korea; Agatha Cheung, a director migrating from Standard Chartered's DCM team covering China; and Elaine Kwan, a new arrival from ABN Amro's DCM team.
Accredited Home Lenders Holding Co. agreed last Tuesday to a revised $295 million purchase by Dallas-based Lone Star Funds. This new deal replaces the $400 million sale both parties agreed to in June. Accredited shareholders will now receive $11.75 a share, equivalent to a 20% premium on Tuesday's closing price. To compare, the first deal called for a payment of $15.10 a share. On Aug. 30, Lone Star proposed a 44% cut to its purchase agreement to $8.50 a share. The beleaguered mortgage lender, which had sued Lone Star to force the private-equity firm to complete the sale ahead of the proposed price cut, said that a reduction was not in order. Accredited had sued its prospective buyer because Lone Star said it might pull out of the deal, citing the drastic deterioration in Accredited's financial condition. As a result of the new agreement, all litigation will be dropped, as will most of the original deal's closing conditions. Lone Star has also agreed to provide Accredited with $49 million in financing. Roughly $34 million of this amount will be used to pay off existing creditors, and the rest will be used to boost Accredited's liquidity.
CIT Group said last week that it will sell between $3.5 billion and $4.2 billion in MBS to mortgage financier Freddie Mac. The securities are rated AAA' and the transaction should close by the end of September. CIT Group plans to borrow $2 billion via an interim facility from Morgan Stanley as it finalizes the sale to Freddie Mac. The $2 billion will be repaid after the deal with Freddie Mac is done. The sale of the mortgages is another step in CIT Group's exit from its RMBS business. In related news, Jeffrey Peek, chairman and chief executive of CIT Group, has resigned from the board of directors of Freddie Mac. The reason for the resignation was to avoid the appearance of a conflict of interest in connection with the GSE's proposed sale of securities backed by CIT mortgages.
Citi Malaysia plans to issue Malaysia's first rated RMBS transaction backed by shelter home loans that were originated by Citi. Citi sold these loans to special purpose vehicle PRORumah. The RMBS transaction has a legal maturity of up to 23 years. RAM Rating Services rated the deal's Class A, Class B, Class C and Class D bonds as AAA,' AA2,' A2' and BBB2,' respectively.
Moody's Investors Service stated last week that early default trends persist in U.S. RMBS that were originated in 2006. Some of the highlights of the report include the fact that the fallout from aggressive home-loan underwriting and a prolonged housing downturn are still factors in poor collateral performance as well as early defaults among loans backing recent-vintage RMBS. The rating agency expects these early defaults will lead to downward rating pressure on a number of U.S. subprime and Alt-A tranches. Moody's also said that six-month default rates are still rising considerably for loans backing RMBS issued in last year's third and fourth quarters. According to the agency, new data show that this deteriorating trend is also apparent in 12-month default rates.
The Office of Federal Housing Enterprise Oversight an-nounced changes in the way it calculates portfolio caps for Fannie Mae and Freddie Mac. These changes, which become effective this quarter, are replacing the May 2006 agreement with Fannie Mae as well as the July 2006 agreement with Freddie Mac. OFHEO announced that the changes should allow each GSE to buy or securitize at least $20 billion of subprime, lower-credit and affordable multifamily housing mortgages in the next six months. In a research report, UBS said that the move is "small potatoes overall, but will allow Fannie Mae to grow its portfolio by 2% per year (matching Freddie Mac's growth limit)." Analysts also called it a more concrete step toward pushing the GSE to purchase more subprime mortgages in the next six months. They added that using current portfolio size, the net differences between the old and the new cap amounts to a slight net addition to portfolio growth over the third and fourth quarters of roughly $1.5 billion. But the change would still allow Fannie Mae to grow at 2% annually, which means a portfolio increase of approximately $15 billion per year, UBS said.
The holders of 122.5 million ($171 million) worth of CPDOs have been forced either to provide Euribor-rate loans to the instruments or to crystallize a hit to net asset value to preserve the notes' ratings, according to independent credit research firm CreditSights. The firm noted that 147.5 million ($206 million) worth of CPDOs that did not do either of the above were recently downgraded three notches to Aa3,' CreditSights said. Holders of 20 million of Elm Financial CPDO issued by UBS removed five names - Ambac, MGIC, Radian, CIT and PMI - from the portfolio, which resulted in a $14 mark-to-market loss to maintain the rating, the research firm said. The possibility of downgrades from Moody's Investors Service late last month forced the restructuring of four CPDOs, which all referenced a portfolio of 50 financial CDS and were issued in April 2007. Three of the transactions were issued under Elm, worth 225 million ($314 million), and were initially rated Aaa.' The counterparty to a 50 million swap referenced as financial CPDO CDS, with a lower original rating of Aa2,' has been forced to inject new money and remove the same five names from the reference portfolio to keep the rating, CreditSights said.
Calyon, a corporate investment banking unit of Credit Agricole, disclosed that on Sept. 4, its senior management was told that an unusually big market position existed on the books of the proprietary trading desk at its wholly owned New York unit. Most of this position was on diversified credit market indices, which is not subprime market-related. It was mostly made in the last days of August and was above the authorized limit. It was also without the authority to engage the bank at the level of this trade. As of last Tuesday, the position has been brought back within Calyon's normal trading activities. The company also disclosed that the pertinent disciplinary actions have been taken against the parties concerned. The trading-limit alert as well as the security controls were strengthened to prevent any such incident occurring again. Considering the cost of unwinding this unauthorized trade, the overall impact on Calyon's 3Q07 results is projected at 250 million ($349.7 million).
Impac Mortgage Holdings announced last week that it is exiting certain business operations. Those operations include warehouse lending, commercial lending and most of its mortgage lending, except for certain corporate-owned retail facilities that originate conforming mortgage loans from the Pinnacle acquisition. As a result, the company has to let go of an additional 144 employees nationwide. The firm attributed the closings to continued market disruptions and illiquidity in nonconforming and Alt-A mortgage sectors.
NovaStar Financial is terminating its status as a REIT, retroactive to the start of 2007, after determining it could not pay investors a required dividend, the firm announced last week. This caused Novastar's shares to drop more than 21%. The Kansas City-based mortgage lender stated that the change required it to file a new tax return for 2006. The company also disclosed that it has asked the U.S. Internal Revenue Service for more time to pay its tax liability. Novastar stated that the refund it would receive from tax losses this year should offset that liability, although it still expected to take a considerable charge in the third quarter. The amount of that charge had not yet been determined by press time.
Lehman Brothers last week reported that the credit crunch cost it $700 million in lost revenues in the third quarter as the full financial effect from this summer's market fallout began to come to light. Lehman announced that its leveraged loans, as well as different ABS holdings, have slumped in the three months ended August. The firm said some losses were offset elsewhere, although the net reduction in quarterly revenue remains at $700 million. The precarious credit markets mean that Lehman's fixed-income capital market business, which holds its credit exposure, reported a 47% dip in quarterly revenues to $1.1 billion. This is compared with $2 billion over the same period last year. The drop forced the overall capital markets division into a 14% revenue dip to $2.4 billion for the third quarter of 2007.
Merrill Lynch cut jobs at its nonprime wholesale mortgage lender First Franklin Financial Corp. The number of layoffs was not disclosed, nor was the total number of employees before the announcement. Merrill is also closing First Franklin's Campbell, Calif., office but did not elaborate on how many of its 28 offices across the U.S. will also be shut down.
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