ABS

A weakened housing market might have changed the composition of the underlying collateral in CNH Capital America's $1.2 billion offering last week, but pricing appeared unscathed.

Wall Street dealers, some of which are rumored to be taking substantial losses from the ailing subprime mortgage market, are tightening the purse strings - in part to limit their exposure to mezzanine ABS CDOs. Rumors were running rampant last week of pulled or significantly tightened warehouse lines, liquidations and difficulty selling deals once they had priced.

Jardine Lloyd Thompson Group, a risk management advisor and insurance broker, and ICAP, an interdealer broker, formed a joint venture that might, among other deals, originate and structure insurance-related ABS deals.

The subprime mortgage market, stuck in a frenzied fall from popularity that began in full force several weeks ago, is generating all sorts of concerns among portfolio managers, dealers and broader financial market professionals. After last Tuesday's widespread sell off in just about everything except Treasuries, portfolio managers and traders alike want to know when the bloodletting will stop and whether they are next in line to feel the same kind of pain.

A number of market sources are predicting a Darwinian fate for CDO managers similar to that playing out among subprime mortgage lenders, as the credit cycle turns and funding can no longer be counted on. And while those established in the CDO sector have been eagerly awaiting spread tiering and greater availability of collateral, it's interesting to note that even among the Wall Street insiders, no one seems to have a firm grasp on just how many active CDO managers there are today.

Fremont General Corp., the country's third-largest subprime lender and the originator behind the first 2006 vintage collateral to receive negative rating action, announced late last week it would delay its fourth quarter earnings announcement and annual report filing.

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JP Morgan 3,580.8 1 32.0 7 HSBC Holdings PLC 1,458.7 2 13.0 2 Barclays Capital 1,348.8 3 12.1 2 Banc of America Securities LLC 1,347.1 4 12.0 3 Wachovia Corp 1,210.7 5 10.8 3 ABN AMRO 605.5 6 5.4 1 Royal Bank of Scotland Group 599.3 7 5.4 1 Credit Suisse 550.0 8 4.9 1 Morgan Stanley 492.3 9 4.4 1 Industry Total 11,193.2 - 100.0 12 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 8,867.8 1 23.2 7 Citigroup 6,327.8 2 16.6 7 Barclays Capital 6,106.6 3 16.0 3 UBS 5,489.0 4 14.4 5 Deutsche Bank AG 3,067.3 5 8.0 6 Morgan Stanley 1,651.6 6 4.3 7 Bear Stearns & Co Inc 1,485.8 7 3.9 3 JP Morgan 1,293.0 8 3.4 3 Banc of America Securities LLC 1,269.0 9 3.3 2 Lehman Brothers 965.0 10 2.5 2 Industry Total 38,218.3 - 100.0 48 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 5,169.8 1 38.5 6 Banc of America Securities LLC 4,312.4 2 32.1 6 Deutsche Bank AG 1,191.3 3 8.9 7 Wachovia Corp 962.5 4 7.2 3 HSBC Holdings PLC 500.0 5* 3.7 1 Citigroup 500.0 5* 3.7 1 Morgan Stanley 350.0 7 2.6 1 Lehman Brothers 266.3 8 2.0 3 Royal Bank of Scotland Group 87.5 9* 0.7 1 Credit Suisse 87.5 9* 0.7 1 Industry Total 13,427.2 - 100.0 24 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 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 Citigroup 6,325.4 1 12.8 11 Deutsche Bank AG 4,798.0 2 9.7 6 Merrill Lynch 4,533.6 3 9.2 6 Morgan Stanley 4,342.5 4 8.8 4 Lehman Brothers 4,253.5 5 8.6 10 Goldman Sachs & Co 3,646.5 6 7.4 4 Countrywide Securities Corp 3,142.0 7 6.4 2 Royal Bank of Scotland Group 3,048.1 8 6.2 5 Barclays Capital 2,492.2 9 5.1 7 Credit Suisse 2,365.2 10 4.8 3 Industry Total 49,294.0 - 100.0 70 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 LLC 3,128.9 1 28.5 3 Goldman Sachs & Co 1,380.7 2* 12.6 1 Lehman Brothers 1,380.7 2* 12.6 1 Barclays Capital 1,343.3 4* 12.2 1 Morgan Stanley 1,343.3 4* 12.2 1 Credit Suisse 1,343.3 4* 12.2 1 JP Morgan 541.2 7 4.9 1 UBS 535.2 8 4.9 1 Industry Total 10,996.6 - 100.0 5 Source: Thomson Financial

auto ABS 12% credit card ABS 10% real estate ABS 67% student loan ABS 11%

Moody's Investors Service late last Wednesday put on watch for downgrade a handful of subprime lenders' servicing operations, helping to roil the already volatile ABX.HE 06-2 index, which broke below 80 last week. The move prompted perhaps the biggest concern among home equity ABS investors already holding securities to the forefront - that the recent challenging atmosphere for subprime lenders could bleed through to loan servicing quality. In subprime lending, servicer quality is considered one of the most crucial aspects of loan performance, particularly as borrowers' monthly payments go up as a result of rate resets and other structural nuances.

SunTrust Robinson Humphrey's CDO team has left the company, despite the firm's plans for growth in the sector in 2007 and a media push to promote it.

Home equity loan ABS, as usual, dominated new issuance volume last week, similar to the way that the mortgage market dominated news and investor concerns.

Allegheny Energy, which is preparing a $466 million transaction to finance the costs of construction on an emissions control facility at a West Virginia plant, recently specified the amount of registered bonds to be issued under one portion of its planned transaction.

The TABX index began trading Feb. 14 at spreads much wider than a number of market players had anticipated. While not as shocking as, say, Britney Spears' new buzzcut, aside from structural differences, the trend in the TABX so far could indicate that investors place quite a bit of value in a CDO manager's ability to handpick good credits and trade out of bad ones. The implied triple-A tranches of the TABX came out of the gate pricing north of 100, double-As between 600 and 800, single-As between 1,400 and 1,800, triple Bs at nearly 2,000 and double-Bs between 2,000 and 3,000 basis points, according to JPMorgan Securities analysts, who described the pricing divergence against the back of mezzanine SF CDO spreads as "almost shocking."

FinanSure Student Loans, a Chicago-based student loan provider, is preparing to launch a $925 million securitization deal primarily backed by FFELP consolidated education loans. This marks the student loan issuer's first time coming to the ABS market.

ABS and MBS hedge fund Highland Financial Holdings Group recruited Sheila Huang as director and portfolio manager of the firm's high-grade strategies division. The move reflects, and continues be part of, ongoing efforts at Highland Financial to grow its personnel along with its business.