ABS

NEW YORK - Borrowers would benefit from loan modifications that are implemented properly. While this would also maximize deal cashflow and thus benefiting investors, industry experts roundly rejected the notion of loan modification imposed by Congress.

For those familiar with the sector, the name structured investment vehicles (SIV) can suggest a fairly generalist, diverse investment strategy, and for much of the industry's history, that was true. These days, however, newer SIV managers are targeting structured finance assets to bolster their vehicles.

Conversation surrounding the U.S. loan credit default swap index (LCDX) was buzzing last week as both investors and traders at The Loan Syndications and Trading Association's Loan Only Credit Default Swaps conference in New York on Wednesday, geared up for the index's May 22 launch. And despite initial skepticism about the product's success, market players were optimistic about its acceptance.

Fitch Ratings last week issued its first presale report for subprime RMBS. The rating agency plans to issue the reports for subprime deals initially, and may eventually draw them up for Alt-A and prime deals, said Glenn Costello, managing director and co-head of RMBS at Fitch.

Cigarette consumption in the U.S. is declining, according to industry statistics, which suggests a shortfall in available revenue to secure tobacco ABS deals. As Louisiana and Virginia prepare to issue their own tobacco settlement bonds, however, securitization professionals say there is still plenty of room for growth in the unique asset class.

Last week, LatAm players assembled for what's become a requisite chatfest for anyone who's serious about this market. Euromoney and LatinFinance held their sixth annual Securitization in Latin America Summit in Miami, attracting more than 300 attendants, more than at any other time, and over triple the number of a few years ago.

The use of loans backed by commercial real estate (CRE) as collateral for asset-backed CDOs in Europe might not have completely revived a rather dull market, but it has nonetheless added a sparkle that market participants believe has been missing for a while in European asset-backeds.

CIFG is expanding its European presence with the hiring of Richard Lumley as director and Louise van der Boon as an associate for its European structured finance team. This is a response to the growing European asset-backed market, specifically in the consumer and mortgage-backed arena.

Russia-based MDM Bank priced a $350 million diversified payment rights (DPR) deal last week via Dresdner Kleinwort.

Pan-European deals are expected to be a major growth driver for CMBS volumes this year. However, critics argue that there is still much in the way of developing a true Pan-European market that looks across more than the handful of jurisdictions included in the deals seen to date.

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JP Morgan Securities 8,539.2 1 33.9 10 Wachovia Securities 8,416.4 2 33.4 8 Banc of America Securities 6,110.7 3 24.3 5 ABN AMRO 5,149.8 4 20.5 4 Barclays Capital 4,837.2 5 19.2 4 Deutsche Bank Securities 3,706.9 6 14.7 3 Credit Suisse 3,631.1 7 14.4 3 RBS Greenwich Capital 3,561.5 8 14.2 3 HSBC Securities 2,058.0 9 8.2 2 Citigroup Global Markets 2,055.1 10 8.2 3 Industry Total 25,162.7 - 100.0 27 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Merrill Lynch 26,501.4 1 20.1 30 Citigroup Global Markets 14,489.4 2 11.0 23 JPMorgan Securities 10,756.0 3 8.2 19 Wachovia Securities 9,636.8 4 7.3 17 Morgan Stanley 9,493.8 5 7.2 38 UBS 8,134.0 6 6.2 14 Barclays Capital 8,133.7 7 6.2 10 Banc of America Securities 7,166.7 8 5.4 8 Bear Stearns 6,767.9 9 5.1 13 Deutsche Bank Securities 6,546.6 10 5.0 15 Industry Total 131,865.7 - 100.0 233 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JPMorgan Securities 10,405.0 1 26.8 17 Banc of America Securities 9,415.0 2 24.3 16 Citigroup Global Markets 7,500.0 3 19.3 9 Morgan Stanley 5,252.6 4 13.5 6 Credit Suisse Securities 2,842.6 5 7.3 4 Deutsche Bank Securities 2,575.0 6 6.6 8 Barclays Capital 2,350.0 7 6.1 4 ABN AMRO 2,242.6 8 5.8 2 RBS Greenwich Capital 2,075.0 9 5.3 6 Wachovia Securities 2,025.0 10 5.2 4 Industry Total 38,815.3 - 100.0 58 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Countrywide Securities 20,686.4 1 14.0 20 RBS Greenwich Capital 18,881.3 2 12.8 24 Merrill Lynch 16,905.5 3 11.4 17 Morgan Stanley 14,377.0 4 9.7 15 Banc of America Securities 13,319.4 5 9.0 18 Lehman Brothers 12,783.9 6 8.6 15 Citigroup Global Markets 12,302.7 7 8.3 14 Bear Stearns 11,872.1 8 8.0 20 Deutsche Bank Securities 8,894.1 9 6.0 12 JPMorgan Securities 8,011.0 10 5.4 9 Industry Total 147,923.4 - 100.0 185 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JPMorgan Securities 11,994.9 1 45.7 4 Banc of America Securities 11,558.4 2 44.0 4 Barclays Capital 8,836.0 3 33.7 2 Credit Suisse Securities 8,707.8 4 33.2 3 Deutsche Bank Securities 7,729.2 4 29.4 3 Morgan Stanley 6,270.3 6 23.9 2 Goldman Sachs 5,842.0 7 22.3 2 Wachovia Securities 4,806.0 8 18.3 1 Lehman Brothers 4,142.0 9 15.8 1 RBS Greenwich Capital 3,051.4 10 11.6 1 Industry Total 26,248.6 - 100.0 11 Source: Thomson Financial

auto ABS 8% credit card ABS 12% equipment ABS 1% real estate ABS 70% student loan ABS 9% trade receivables 0% utilities ABS 0%

Merrill Lynch's collateralized FX obligation (CFXO) structure is the subject of quite a bit of chatter.

A number of market players are counting on newly issued subprime mortgages to perform better than those originated six months or even three months ago, as marginal issuers are weeded out along with the type of borrowers that they sought.

The U.S. House of Representatives' approval of tighter restrictions on the preferred lender relationships between student loan providers and universities is not expected to adversely affect the securitization industry. However, market professionals are already awaiting further Congressional actions that could significantly impact the SLABS sector.

The gush of issuance from the subprime MBS sector has slowed significantly since the overall ABS market kicked off in January and it is beginning to drag down overall issuance numbers, too. No doubt, this is sobering news for the ABS industry.