ABS

The role of the CDO manager has been called into question lately as market participants have suggested that investors are bound to favor static deals.

The once mighty real estate sector in Mexico isn't looking so unsinkable anymore. Originators are sticking to issuance plans, but spreads are blowing out. Real estate receivables aren't exhibiting the credit problems pervasive in U.S. subprime, but that apparently hasn't been much comfort to local investors.

The decision last week by the Federal Reserve to flow up to $200 billion into the credit market has done little to embolden market participants, many of whom believe the Fed's action did not go far enough to help the credit crunch.

Moody's Investors Service cut Washington Mutual's credit rating today and said that the mortgage firm will need at least an additional $4 billion more than it expected to compensate for the bad mortgages it has in its portfolio in 2008. The rating agency stated that its action shows a rapid deterioration of the housing sector in the first few months of this year, which was the same reason Standard & Poor's used to cut WaMu's ratings a week ago. WaMu has projected that it will write-down up to $8 billion this year on account of borrowers who can't make their mortgage payments. Resulting fiscal-year losses could remove the cash cushion that keeps the mortgage company in compliance with regulations, Moody's stated in its release. Moody's brought down WaMu's senior unsecured rating to 'Baa3' from 'Baa2.' It also cut Washington Mutual Bank's long-term deposit rating to 'Baa2 from 'Baa1.'

Ambac has completed its $1.5 billion equity offering and is working to restore market confidence, said John Uhlein, executive vice president at Ambac Financial Group. Uhlein, was among the panelists from the bond insurance industry who spoke at the American Securitization Forum's sunset seminar on financial guarantors yesterday. In what seemed to be a remarkably upbeat discussion, Uhlein noted that many of Ambac's previous stock holders, 20 investors owned approximately 80% of Ambac's stock prior to the offering, invested in the offering and were supportive of the capitalization plan. Cerberus Capital Management has also been publicly identified as an investor in the offering. While Uhlein acknowledged that a prior deal to split the company had been discussed, ultimately Ambac decided that it would remain a single entity, primarily out of fear that a separated structured finance unit might not be able to generate enough capital to sustain a triple-A rating. "If you want to be a triple-A company, you have got to make that decision," Uhlein said. He noted that a 'AA'-rated monoline is much more niche.

Fitch Ratings President and CEO Stephen Joynt today issued the following statement. Joynt's remarks were a response to comments made today by U.S. Secretary of the Treasury Henry Paulson in a speech at the National Press Club in Washington, DC. "We commend the President's Working Group on their thoughtful observations on the market events of the past several months," Joynt said. "We will continue, on our own and with our industry, to work with regulators, investors and other market participants to ensure that our ratings are the most transparent, useful and accurate that they can be."

Fitch Ratings has placed the Washington Mutual covered bond program series 1, 2 and 3, rated 'AAA' on Rating Watch Negative. This move came after the lowering of Washington Mutual Bank's long-term Issuer Default Rating (IDR) to 'BBB' from 'A-' and affirmation of its short-term IDR at 'F2'. The outlook for WaMu's long-term IDR remains negative. Under the rating agency's covered bond methodology, a downgrade of the long-term IDR of the financial institution acting as debtor of recourse could possibly lead to a downgrade of the covered bond rating depending on the assigned Discontinuity Factor (D-Factor). The D-Factor measures the likelihood of an interruption of payments resulting from covered bond holders caused by the transition from the debtor of recourse to the cover pool as a source of payment on the covered bonds. Fitch is currently assigning a D-Factor to WaMu's program. The rating agency will consider the validity of the segregation mechanism by looking at the assets pledged over other factors. These other factors include the mortgage bond indenture trustee, the robustness of WMB's IT systems to manage the cover pool, the liquidity gaps between the cover pool and the covered bonds in a WMB insolvency scenario, notably considering the effect of a potential 90-day stay period imposed pursuant to Federal Deposit Insurance Act; as well as the lack of a dedicated covered bonds oversight in the U.S, the rating agency said.

Fitch Ratings President and CEO Stephen Joynt sent a letter to MBIA on Monday responding to the bond insurer's letter dated March 7 asking that the rating agency withdraw the firm's IFS ratings. In the letter, Joynt said that Fitch is sympathetic to the "financial and operational stress" that MBIA is going through and is willing to continue its ratings without charge to the bond insurer. Joynt also asked for clarification of MBIA's intentions in terms of cooperating with Fitch's rating process. MBIA requested Fitch to return or destroy key portfolio information and discontinue all use of the said information in proceeding with its rating analysis. Joynt questioned MBIA's intentions that were stated in the bond insurers' letter to investors dated March 9. "It would appear that rather than 'work with Fitch' your intention could be to emasculate our opinion by withholding information and subsequently discredit our opinion as being uninformed," Joynt said. Joint questioned whether it is the Fitch capital model, rating process or fees that MBIA objects to or is that MBIA is "aware we are continuing our analytical review and my conclude that , in our view, MBIA's insurer financial strength is no longer 'AAA.'"

Thacher Proffitt announced the formation of a distressed asset practice group. The group, which is co-chaired by bankruptcy partner Hugh McDonald and structured finance partner Christopher Lewis, will focus on all aspects of distressed assets, including structuring and negotiating rescue and exit financing -- DIP lending and pre-bankruptcy forbearance arrangements --debt restructurings, foreclosures, asset dispositions, the formation of hedge funds, private equity vehicles and other investment structures for the acquisition of distressed assets as well as the acquisition and disposition of distressed debt including corporate debt and structured finance securities --CDOs, SIVs, RMBS, CMBS and ABS -- trade claims, lease products, equipment certificates and litigation claims. The group will be made up of attorneys from Thacher's structured finance, bankruptcy, litigation and tax practice groups.

Lewtan Technologies appointed Thomas Karanian to the new post of senior vice president of technology and data operations. Karanian retains his title of chief technology officer (CTO). The new appointee has been responsible for overall corporate technology strategy and direction, and for managing the company's technology components and initiatives. He has now assumed oversight of the surveillance firm's data services department.

The move is a coordinated effort by the Fed with European and Canadian banks, which plan to inject up to $45 billion in their banking systems, according to reports. The Fed plans to hold auctions of Treasuries in exchange for debt including 'AAA'-rated mortgages sold by Fannie Mae, Freddie Mac and by banks, according to a statement. The Fed also set up the Term Securities Lending Facility, which will be used to lend Treasuries to primary dealers for 28-day periods through its weekly auctions. The agency did not agree to make outright purchases of mortgage debt, something that some analysts had wanted.

Law firm Gide Loyrette Nouel closed its first MBIA-wrapped securitization since the credit crunch started in August. The bonds have been rated triple-A. Gide Loyrette Nouel represented the arrangers Calyon, which was lead arranger, Bank of Scotland and CIC on the €800 million ($1.2 million) whole business securitization for the Fraikin Group, Europe's leading truck leasing and fleet management company. Gide Loyrette Nouel also acted for MBIA. The deal enabled the partial takeout of CVC Capital Partners' bridge acquisition financing from its February 2007 takeover of Fraikin, establishing a five-year, €250 million credit facility to help Fraikin continue to grow its fleet. Monoline wraps used to be a typical feature on these more complex deals but following the credit crunch, banks have lost confidence in monoline insurers. To counter this, Gide Loyrette Nouel and Calyon introduced novel contractual and tax structuring features that has had a positive impact on the 'borrowing base' mechanism with a corresponding decrease in the level of credit enhancement required by the monoline insurer and the rating agencies. "Bringing this deal to a successful conclusion was a 'little miracle," said Patrice Doat, a Gide Loyrette Nouel partner based in London. "This was the first securitization of this type to close since difficulties arose on the markets in the summer of 2007. This was a unique, twelve month marathon deal combining a great number of parties and novel complex contractual and tax structuring. It is an excellent reflection of Gide's crossborder, multi-party capabilities."

CIFG Holding, the holding company for CIFG's financial guaranty subsidiaries, named Richard A. Price, Jr. non-executive chairman of the board of directors of the firm. Price will be responsible for developing long-term strategy to build CIFG's franchise and work with CIFG's senior management to maximize shareholder value. The new appointee most recently served as chief executive officer of Zurich Capital Markets and Centre Re, both wholly-owned subsidiaries of Zurich Financial Services. Previously, Price was founder and chief executive officer of CGA Group, which is a Bermuda-based financial guarantor.

Markit is gearing up for the launch of the iTraxx LevX Series 2, the second installment of the credit default swap index referencing European corporates. The new series is set to roll on March 17. There will be a pricing call on March 14, which is when the coupon levels are determined. On a conference call this morning, Markit officials announced that the new series includes a number of changes from Series 1, which originally launched in September 2006. Most notable among the changes is that both the senior and subordinated indexes of the LevX Series 2 will now have non-cancellable contracts, or "less cancellable," according to David Geen, general counsel at the International Swaps and Derivatives Association, who spoke on the call. The intention on the non-cancellable contract is that when there is a refinancing, the contract will reference the facility or facilities that refinance the original reference obligation. However, there are some situations where there is no suitable successor credit agreement but the contract will still cancel, Geen said. Another important feature in the Series 2 is the use of interim and final summaries related to successor credit agreements published by Markit. These will be used rather than determinations by individual calculation agents. The senior index will have 75 equally-weighted LCDS for first lien loans and the subordinated index with have 45 equally-weighted LCDS for second and third lien loans, as opposed to 35 equally-weighted names for both indices, respectively, seen in the Series 1. Series 2 will feature semi-annual portfolio rolls with quarterly coupons and a five year maturity, which is similar to the traditional iTraxx indices, Tobias Sproehnle, director at Markit said on the call. The reference obligations in both the senior and subordinated series are weighted the heaviest in cable, telephone companies and wireless with 16% of the total obligations in both indices, with General Industrials and Food and Beverage, making up 13% and 11%, respectively. Markit said it will be providing information on the reference data, including reference credit agreements and reference obligations, included in iTraxx LevX Series 2 for investors for free for thirty days. Dealers will not be redistributing the data, Markit noted.

The commercial/multifamily delinquency rates ended 2007 at or near record lows for most major investor groups, according to an inaugural analysis released by the Mortgage Bankers Association. Four of the major investment groups --commercial mortgage-backed securities, life companies, Fannie Mae and Freddie Mac -- were at or near historically low levels, according to the MBA study. The delinquency rates for the fifth investment group, FDIC-insured commercial banks and thrifts, were lower at year-end than 10 of the previous 16 years. These five investor groups hold more than 80% of commercial/multifamily debt outstanding, according to the MBA. "This is an important new analysis that helps cut through much of the recent 'noise' on commercial real estate finance," Steve Graves, managing director & Chief Operating Officer of Principal Real Estate Investors and chair of the MBA's Commercial Board of Governors, said in a statement said.

The U.K. mortgage market is predominantly a refinance market, with borrowers on average refinancing their loans every two to four years after the expiration of their teaser period.

In a testimony last Thursday before the Committee on Banking, Housing and Urban Affairs, National Association of Realtors' Public Policy Chair Vincent Malta argued that the national GSE conforming loan limit should be permanently raised to $625,500 or higher. Malta also suggested raising the limits an additional increase of 125% of the local median home-sales price in high-cost areas. "Fannie Mae and Freddie Mac provide liquidly and stability in the mortgage market and are vital to the housing sector," he said. Malta urged that such a move would increase home sales by nearly $350,000, lower inventories and increase home prices by 2% to 3%. It would also result in as many as $210,000 fewer foreclosures, and more than 500,000 borrowers would be able to refinance into lower interest rate loans, he said.

Freddie Mac released last week its quarterly Conventional Mortgage Home Price Index (CMHPI) for the fourth quarter.

In Capitol Hill's rush to aid borrowers and stem the tide of foreclosures, are investors being thrown under the bus?