ABS

The newest spin on the ABX index, the ABX tranche indices (TABX), debuted in the market on Valentine's Day, bringing with it hopes of a benchmark for CDO pricing.

Babson Capital Management closed a $600 million CDO last week. The Sapphire Valley CDO, Ltd. portfolio consists of approximately 80% leveraged loans and 20% securities. Of the 20% securities, 40% are expected to be sourced synthetically through total return swaps (TRS) which will provide investors with assets that are difficult to source in the cash market, the company said. "TRS allowed us to increase our exposure to top tier managers from strong CLO vintages while reducing the time required to ramp-up," said Matthew Natcharian, managing director and head of Babson Capital's structured credit team in Springfield. The weighted average cost of the debt for the transaction was Libor plus 46 basis points. Banc of America Securities arranged the obligation and buyers included both U.S. and international institutional investors.

Relationship pundits say an indispensable element to any successful connection is communication. In the world of structured finance, where the stakes are higher, a solid liquidity backstop is emerging as the key to a successful relationship between CDOs and the asset-backed commercial paper conduits that fund them.

Since the story was written sources said that 13 members of the SunTrust CDO team have left the company for another opportunity.

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Wachovia Corp 998.8 1 22.4 2 HSBC Holdings PLC 859.4 2 19.3 1 Banc of America Securities LLC 797.1 3 17.9 2 JP Morgan 704.8 4 15.8 2 Barclays Capital 598.8 5 13.5 1 Morgan Stanley 492.3 6 11.1 1 Industry Total 4,451.1 - 100.0 5 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 Barclays Capital 2,323.0 1 27.5 1 Bear Stearns & Co Inc 1,485.8 2 17.6 3 JP Morgan 918.0 3 10.9 2 Citigroup 767.7 4 9.1 1 Morgan Stanley 675.0 5 8.0 2 Banc of America Securities LLC 669.0 6 7.9 1 Deutsche Bank AG 603.3 7 7.2 2 Goldman Sachs & Co 500.0 8* 5.9 1 Lehman Brothers 500.0 8* 5.9 1 Industry Total 8,441.7 - 100.0 14 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 2,000.0 1 41.9 1 Banc of America Securities LLC 1,812.4 2 38.0 5 Wachovia Corp 962.5 3 20.2 3 Industry Total 4,774.9 - 100.0 8 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 4,881.5 1 14.8 8 Morgan Stanley 3,946.7 2 12.0 3 Merrill Lynch 3,666.8 3 11.1 4 Deutsche Bank AG 3,652.5 4 11.1 3 Lehman Brothers 2,981.8 5 9.0 7 Royal Bank of Scotland Group 2,669.7 6 8.1 4 Bear Stearns & Co Inc 1,979.1 7 6.0 5 Barclays Capital 1,766.8 8 5.4 6 Credit Suisse 1,668.0 9 5.1 2 UBS 1,351.5 10 4.1 2 Industry Total 32,987.0 - 100.0 47 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 Goldman Sachs & Co 1,380.7 1* 29.5 1 Lehman Brothers 1,380.7 1* 29.5 1 Banc of America Securities LLC 1,380.7 1* 29.5 1 JP Morgan 541.2 4 11.6 1 Industry Total 4,683.2 - 100.0 2 Source: Thomson Financial

auto ABS 15% credit card ABS 11% real estate ABS 67% student loan ABS 6%

The securitization industry is preparing to strike back at a U.S. Court of Appeals ruling that allows the Federal Deposit Insurance Corp. (FDIC) to ignore a credit card ABS trust contract's ipso facto clause, which would have triggered an early amortization of outstanding notes from defunct credit card issuer NextBank.

Just as the student loan ABS sector was digesting proposed cuts to federal student loan subsidies proposed by Congress, it was hit with a Bush administration proposal to cut lenders' special allowance payments (SAP) by 50 basis points in the 2008 budget plan. If Congress sanctions the changes, then it could change operations at several student loan providers. Future student loan ABS structures might experience declines in excess spreads from their existing levels, say industry observers.

Subprime lender stocks fell along with the ABX.HE index last week, as more news of troubled subprime lenders reverberated through the market. And unlike in the recent past, the news affected the second and third-largest U.S. subprime lenders - HSBC Holdings Plc and New Century Financial Corp., respectively. While sources betting against the subprime sector could almost be described as giddy, those on the other side of the fence worried that the damage 2006 vintage loans seemed to be causing for lenders might be the beginning of unprecedented defaults.

Ordinarily, a week of $20 billion in new ABS issuance would be considered a marvelous accomplishment, and one that would be expected for the market, especially after coming off of a major industry conference. Although the consumer ABS sectors hummed along with scarcely a worry, that buoyancy was juxtaposed against wild, painful gyrations in the HEL sector.

Credit derivatives market participants following the Aon Corp. versus Societe Generale case - which was on appeal before the United States Court of Appeals for the Second Circuit - were finally able to exhale last week. The court overturned a 2006 district court ruling that had favored Aon. The decision effectively sealed a Pandora's box full of disgruntled counterparties seeking to argue contract terms, according to industry experts.

Fitch Ratings continued its business expansion and substantial reorganization of its executive lineup last week.

Domino's Pizza is planning to issue up to $1.85 billion in asset-backed securities, funded by franchise fees from its stores. In turn, the company plans to use the funds to finance a stock repurchase plan.

Moody's Investors Service will start publishing presale reports for its rated U.S. subprime RMBS. The reports will offer the market a view of a transaction's rating drivers before the deal closes and, through standardized reporting, allow investors to make comparisons across deals.

The Securities and Exchange Commission has released its telephone interpretations on Item 122 of Regulation AB. These were released after Paula Dubberly, SEC associate director, gave a preview on the Commission's stance on this item at the recently concluded American Securitization Forum conference held in Las Vegas.