ABS

To examine the possible effects of a slowdown in home price appreciation, Citigroup Global Markets researchers recently studied a sample portfolio consisting of 75% 2/28 hybrids and 25% fixed rate MBS, with home price appreciation in 2.5% increments varying from a 10% increase to a 2.5% decrease.

At least two CDOs backed by SME collateral priced in Japan's CDO market last quarter, leading to anticipation that SME CLOs will be the busiest area of issuance for this growing Asian market place.

Deutsche Bank Securities Inc. is reportedly near closing a deal with Dallas-based Lift Financial backed by life insurance policies, according to market sources.

With long-demanded changes to Japan's Trust Law (see ASR 5/10/04) likely to be passed by legislators before year-end, banks are ready to take advantage of the changes.

The Financial Accounting Standards Board recently offered a potential loophole appendix to FIN 46 for some in securitization markets with the proposal of FIN 46 (R)-b, the staff position for which may soon be released for a 45-day comment period. FIN 46 (R)-b, offering amnesty from consolidation for parties that do not have an explicit relationship with a particular variable interest entity, will be run past a pair of industry spokesgroups, prior to being released for 45-day comment, which is expected within weeks.

Since adjusting its excess spread assumptions earlier this year, several RMBS-backed CDOs have priced sans a rating from Moody's Investors Service. While in some cases market sources noted the lack of a Moody's rating created an arbitrage opportunity, other market sources speculated that Moody's inability to rate those deals was another unintended consequence of its enhancement adjustment.

The issue of EITF 03-1 may not become much of an issue, at least for a while longer. In its most recent report, UBS said it appears EITF 03-1 has been delayed. The Financial Accounting Standards Board received a tremendous response during the public comment period that ended in October. Analysts say discussions they have had with FASB suggests the magnitude of concerns will require a re-examination, which doesn't seem likely to happen before the end of the year. UBS adds, "the issues are very difficult to resolve, and expect a long term or indefinite postponement."

The U.S. primary ABS market came to life last week to price roughly $13 billion in a pre-holiday rush. Several deals were still making the rounds as of press time Thursday. Home equity volume surged to over $10 billion, more than double last week's volume in the sector.

US Airways' recent decision to continue flying all but 36 of its 282-plane mainline fleet is good news for investors in pooled lease aircraft ABS.

Taking on corporate exposure through the credit derivatives market has become one strategy a growing number of CDO investors are embracing. Yet while the credit derivatives market continues expanding, how liquidity performs for single names is a phenomenon CDO investors may not fully understand when exploring new CDO deals that harness credit derivative swaps.

The city of New York is selling $496.2 million in triple-A rated taxable muni bonds via the Fiscal Year 2005 Securitization Corp. vehicle, a one-off transaction for the city being led by Merrill Lynch.

The best opportunity in the ABS market can be found in the triple-A home equity sector as spreads have widened to the mid-30 basis point to Libor range. The trend to wider home equity spreads bucks the general tightening trend of other asset classes such as credit card and three-year U.K. MBSs. "With the recent positive economic news, especially the employment pick-up, most consumer credit card spreads have continued to ratchet in," writes Thomas Zimmerman, head of ABS research for UBS. "But home [equities] are the exception."

Due to a flurry of post-deadline submissions, ASR has extended the deadline for Deal of the Year nominations through Nov. 30, 2004. Qualifications for entry remain the same, with the exception of the transaction closing date, which has also been moved to Nov. 30. To be eligible, a deal must have closed between Nov. 1, 2003 and Nov. 30, 2004.

Pacific Gas & Electric Co., the electric utility company that was forced into a Chapter 11 bankruptcy in 2001, in the wake of the California energy crisis, is looking to bring its first stranded cost securitization in seven years to the market before year-end. PG&E hopes to price the offering sooner rather than later, according to records, and currently plans to forge ahead despite having yet to receive Internal Revenue Service clearance to price the deal.

Equipment leasing investment company ATEL Capital Group is ready to launch the latest iteration of its equity fund, ATEL Capital Equipment Fund XI, according to a recent S-1 filing with the Securities and Exchange Commission.

With its biggest push in the U.S. ABS market this year, monoline surety provider XLCA wrapped its first-ever HELOC offering last week, a $1 billion series 2004-Q offering from Countrywide Home Loans Inc. XLCA plans to be aggressive in the HELOC sector going forward as part of the guarantor's broader

The U.S. primary ABS market was relatively slow last week as the bond market took the day off on Thursday in observance of Veteran's Day. As of the market's close on Wednesday, total new issue volume was at roughly $5.2 billion but several deals were expected to price on Friday.

The deal flow in structured settlements is expected to maintain a steady pace, and the market could see another public term transaction before year end, sources said.

It's as if the holidays have come early for CDOs, with market constituents reporting outstanding levels of issuance both domestically and globally - and the year still has over a month to go.

By Ron Borod, Esq., partner and the head of, the Structured Finance Group of Brown Rudnick Berlack Israels LLP