ABS

It's looking more likely that the credit derivative product company (CDPC) Athilion Capital Corp. will be downgraded over the short term. Until now, CDPCs had been relatively unaffected by the credit crunch, but the latest action on Athilion will bring this sector under the spotlight.

In a market where securitization deals are few and far between and where creative structures have taken a back seat to plain vanilla transactions, the Louisiana Utilities Restoration Corp. (LURC) is proving that innovation can still create value.

With the market turmoil and investors demanding better credit quality programs, ABCP issuers are responding by cleaning up their act.

Last week there was no shortage of news or data. The week opened with reports of a rescue plan put together by the Treasury Department and the Federal Reserve in an attempt to strengthen confidence in Fannie Mae and Freddie Mac, including the Fed authorizing the Federal Reserve Bank of New York to lend directly to the GSEs if it becomes necessary and the Treasury seeking Congressional approval to increase the GSEs' line of credit and to make an equity infusion into the companies if needed. All these measures are seen as temporary for 18 months.

Treasury Secretary Henry Paulson was right when he said that the GSEs' "continued strength is important to maintaining the confidence and stability in our financial system and our financial markets," since their debt is held by financial institutions worldwide.

Primary issuance and secondary trading remained light last week as Fannie Mae and Freddie Mac uncertainties continued to weigh on the ABS market's mood. This is despite U.S. Treasury Secretary Henry Paulson's rescue plan that will, in essence, guarantee the GSE bonds by buying equity stakes in these companies and boosting the lines of credit available to them.

Deerfield Capital has acquired the management contract for Robeco CDO II, according to today’s release.

As key House and Senate staff tried to work out a deal on legislation to help the mortgage market Friday, Sen. Richard Shelby, the Banking Committee's top Republican whose support is key to passage, gave the first signs that he is willing to compromise.

Manager Activity: AutosFull Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market

MGIC Investment Corp., the nation's largest private mortgage insurer, said Thursday that it expects to break even on the policies it wrote in the first quarter, but that profitability will improve and next year's crop of loans will be an "outstanding vintage."

Capital One Financial Corp. said its second-quarter profit fell 39.6% from a year earlier, to $452.9 million.

Federal Deposit Insurance Corp. (FDIC) officials defended the agency yesterday against charges it has improperly handled the failure of IndyMac Bancorp, stirring concerns among depositors nationwide.

Baker & McKenzie has hired Hans Montag as partner in its New York office. Montag joins the law firm from the New York office of Clifford Chance where he worked for almost ten years.

CIT Group said yesterday its second-quarter earnings fell to $48.1 million, or 12 cents a share, from $352.1 million, or $1.76 a share, largely because of losses related to the sale of its home lending business.

June housing starts printed up 9.1% to 1.066 million units and building permits were up 11.6% to 1.091 million, but the Commerce Department says this reflects new construction codes in New York City that began July 1 and which resulted in a surge in multifamily activity. The far more significant single-family starts fell 5.3% to 647,000, and single-family permits dropped 3.5% to 613,000.

GCO Education Loan Funding Master Trust-II has made a tender offer to purchase certain outstanding senior auction rate bonds at a discount.

Moody’s Investors Service has released a new report entitled Assessing the Importance of an Originator's Retained Interest to Moody's Structured Finance Ratings.

Fitch Ratings has affirmed Fannie Mae's long-term issuer default rating (IDR) at 'AAA', but it downgraded the GSE's preferred stock rating to 'A+' from 'AA-.'

Fixed-rate mortgages recorded double digit declines this week, according to Freddie Mac's weekly survey.

Standard & Poor’s announced last week that it revised its outlook to negative from stable on the core entities of Dexia SA, citing the potential impact of “faster-than-expected deterioration of the U.S. housing market” on the Franco-Belgian bank’s bond insurer subsidiary Financial Security Assurance (FSA).