ABS

MIAMI - Russia's push into the world of existing asset securitization isn't even two years old, and there is already talk of potential bottlenecks on the demand side if the breakneck pace of growth holds firm. These remarks were made at last week's Information Management Network Spring ABS 2007 conference.

The Spanish real estate market is proving strong, despite scares that resulted from the recent decrease in equity prices on the Madrid Stock Exchange (ASR, 4/30/07).

The Bank of England (BoE) reported last week on six potential factors that could slow down Great Britain's macroeconomy. Following the subprime problems in the U.S., the bank highlighted its concerns on similar loans going unpaid as one of those factors, which could threaten the economy's overall growth.

It is good to be king - of the Chicago banking market that is. After agreeing to a $21 billion cash buyout by Bank of America Corp., LaSalle Bank Corp.'s parent company reportedly received a substantial competing bid of $98.1 billion from a consortium of banks led by the Royal Bank of Scotland.

Market participants are working toward packaging currency volatility risk into CDO structures, according to rating agency sources.

More than 1,000 attendees are expected to gather this week at Information Management Network's Spring ABS 2007 conference held in Miami Beach, Fla. Aside from the emphasis on global emerging markets, which is new to this type of conference, what sets this gathering apart is the time it's occurring - when the subprime mortgage market is in the midst of a fallout and is, naturally, on everybody's mind.

Anyone who thinks that the world of insurance-linked securities is too indigestible and dull to generate excitement got a rude awakening last week, when sparks of contention flew between advocates and opponents of the government's role as a reinsurance provider for claims after catastrophic storms.

Leading up to the release of the CMBX 07-1 index last week, concern was mounting regarding the credit quality of recently issued commercial mortgages. Seen by many as the most aggressive of the rating agencies on the topic, Moody's Investors Service earlier this month announced it would require more credit enhancement for CMBS deals amid worsening underwriting standards.

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 7,539.2 1 36.4 9 Wachovia Securities 6,200.0 2 29.9 5 Banc of America Securities 5,350.7 3 25.8 4 Barclays Capital 4,837.2 4 23.3 4 ABN AMRO 4,199.8 5 20.3 3 Deutsche Bank Securities 3,706.9 6 17.9 3 RBS Greenwich Capital 3,561.5 7 17.2 3 Credit Suisse 3,131.1 8 15.1 2 HSBC Securities 2,058.0 9 9.9 2 Morgan Stanley 1,870.3 10 9.0 2 Industry Total 20,721.2 - 100.0 21 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 26,101.4 1 21.7 29 Citigroup Global Markets 14,027.9 2 11.7 22 Morgan Stanley 9,518.1 3 7.9 34 JPMorgan Securities 8,666.1 4 7.2 17 UBS 7,534.0 5 6.3 12 Wachovia Securities 7,322.7 6 6.1 13 Deutsche Bank Securities 6,774.1 7 5.6 16 Barclays Capital 6,487.7 8 5.4 9 Banc of America Securities 6,141.7 9 5.1 6 Bear Stearns 5,845.7 10 4.9 10 Industry Total 120,319.7 - 100.0 209 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 JP Morgan Securities 9,370.0 1 31.4 13 Banc of America Securities 7,265.0 2 24.4 13 Morgan Stanley 4,752.6 3 15.9 4 Citigroup Global Markets 3,700.0 4 12.4 5 Credit Suisse 2,842.6 5 9.5 4 Deutsche Bank Securities 2,300.0 6 7.7 6 ABN AMRO 2,242.6 7 7.5 2 Wachovia Securities 1,275.0 8 4.3 3 Lehman Brothers 1,000.0 9 3.4 2 RBS Greenwich Capital 775.0 10 2.6 4 Industry Total 29,805.3 - 100.0 42 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 16,370.7 1 13.0 17 Merrill Lynch 15,903.7 2 12.6 15 RBS Greenwich Capital 14,899.6 3 11.8 17 Morgan Stanley 13,137.2 4 10.4 14 Lehman Brothers 12,305.9 5 9.7 14 Banc of America Securities 12,158.1 6 9.6 14 Citigroup Global Markets 11,172.7 7 8.8 12 Bear Stearns 9,791.8 8 7.8 17 Deutsche Bank Securities 6,715.1 9 5.3 8 JPMorgan Securities 6,651.0 10 5.3 7 Industry Total 126,314.2 - 100.0 154 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 Banc of America Securities 11,558.4 1 49.2 4 JPMorgan Securities 9,557.4 2 40.7 3 Barclays Capital 8,836.0 3 37.6 2 Credit Suisse 6,270.3 4 26.7 2 Morgan Stanley 6,270.3 4 26.7 2 Goldman Sachs 5,842.0 6 24.9 2 Deutsche Bank Securities 5,291.7 7 22.5 2 Wachovia Securities 4,806.0 8 20.4 1 Lehman Brothers 4,142.0 9 17.6 1 RBS Greenwich Capital 3,051.4 10 13.0 1 Industry Total 23,505.1 - 100.0 9 Source: Thomson Financial

auto ABS 8% credit card ABS 10% equipment ABS 2% real estate ABS 71% student loan ABS 9% trade receivables 0% utilities ABS 0%

Bank of America, JPMorgan Chase and two private equity firms bagged big game when they agreed to buy out Sallie Mae Corp. last week for $25 billion. As the four stake-holding companies now divvy up the spoils of the company, which managed $142 billion in education loans last year, ABS professionals have quickly concluded that the company's securitization activity will increase, not decrease. Spreads on existing SLM paper were in no danger of widening, at least not by press time.

Derivative Fitch last week said the string of so-called "first generation" CPDOs that have come to the market over the last nine months would not warrant a triple-A or even double-A rating using its own methodology.

Several key structured finance executives at HSBC have either resigned or transferred out of its New York office recently, in what some market observers say is the bank's effort to pull back from the subprime mortgage market after losses in that area of its business.

New York's financial markets are looking east for inspiration, and they've found it in the covered bond market. Investors like this product because it represents a way to invest in triple-A-rated or close to risk-free assets at attractive spread levels. Market sources say the benefits are clear for issuers: It is a source of diversification of financing.

Regulators and politicians seemed intent last week for HEL investors to share in the pain of subprime borrowers who are unable - or may soon be unable - to make their monthly mortgage payments.

Hedge fund Fortress Investment Group is planning to buy Fremont Investment & Loan's subprime operations, according to sources close to the deal. The acquisition, which is awaiting due diligence and a final agreement, would be the second such deal for Fortress. The firm acquired subprime lender Centex Home Equity in July of last year.