ABS

No longer content to watch from the sidelines, big players have officially moved into the CDPC space -and some expect they'll come to dominate it, bringing a wave of liquidity with them. Marking the first entrance of a prominent structured credit market participant, Massachusetts Mutual Life Insurance Co., parent of asset manager Babson Capital Management, officially launched its CDPC Invicta Credit LLC. last week. Deutsche Bank and AXA Investment Managers are waiting for a rating for their CDPC, NewLands Financial, and Bear Stearns and AIG Investment Management are also rumored to be hanging in the wings.

Ocean Land Investments, a Boca Raton, Fla.-based developer, has recruited United Capital Markets to underwrite and arrange a construction loan, possibly as much as $5 billion, to redevelop a 43-acre parcel of oceanfront land in Florida.

Conservative ABCP investor Mason Street Advisor, which prefers multiseller programs with the occasional auto loan ABS-backed single-seller programs, is stepping up its participation in those programs.

Mick Brown, an asset-backed commercial paper analyst whose affable demeanor impressed the industry as much as his grasp of the market he covered, died on Friday, Jan. 5. He was 46. The cause was complications from pneumonia.

The Liberty Hampshire Co. is preparing to launch the Valcour Bay Capital Co., an asset-backed commercial paper vehicle that can issue U.S. dollar-denominated CP, callable notes, and extendible notes to buy trade receivables and other financial assets.

Fitch Ratings downgraded Wirefree Partners III, LLC PCS Spectrum Lease-Backed Notes, 2005-1 to BBB', from BBB+', after taking a similar action on the unsecured corporate rating of Sprint Nextel and its subsidiaries.

The ABX.HE plummeted last week to all-time lows amid unrelenting news of issuers pulling out of the subprime mortgage market and the sour performance of loans originated in 2006. The activity - most dramatic in the triple-B tranches of the index's second series - comes on the heels of this week's emergence of the third ABX.HE series.

For a brief moment, January threatened to turn into a lollygagging month for ABS issuance, shortened by two holiday workweeks and the pending American Securitization Forum conference in Las Vegas. Then the AmeriCredit Corp.'s $1.2 billion transaction, secured by auto loans, came roaring across trading desks.

Attractive returns have always been a selling point for plan sponsors, having led many to seek solace in fixed-income. Samuel Austin, senior portfolio advisor with Seneca Capital Management contends that continues to be the case, with one slight amendment. Pension funds are now eyeing "alternative" fixed-income opportunities CLOs and CDOs.

The importance of credit risk management has certainly ballooned over the past few years, with increasing competition for yield. With that in mind, the International Association of Credit Portfolio Managers (IACPM) is heading into 2007 with a new board of directors and an agenda that includes standard form contracts on credit default swaps (CDS), as well as discussion of the implications of converging credit desks, the use of insider information and the increasing amounts of leverage in the market.

In the specialized business of ABS, Citigroup Global Markets attained its top ranking as lead manager of all public and 144a transactions in 2006 by being well rounded. The investment bank arranged about $120.7 billion in ABS deals, giving it a 9.9% share of the term ABS market and putting it well ahead of second-place finisher Merrill Lynch, which cleared $98.7 billion in deals. Overall U.S. ABS issuance totaled $1.2 trillion in 2006, up slightly from $1.1 trillion in 2005, according to Thomson Financial figures.

CDO heavyweight Merrill Lynch once again dominated U.S. CDO underwriting in 2006. The firm brought not only the greatest dollar volume in deals to the market, but also led innovation throughout the sector's record-setting year. Through a combination of landing key clients, new hires and high demand, the investment bank underwrote 65 deals last year totaling more than $50 billion and a 15% market share, according to Thomson Financial league table data.

Claire Robinson won a promotion to senior managing director at Moody's Investors Service, where she will oversee the rating agency's asset finance group for the Americas, as well as its U.S. public finance group.

Rarely do the domestic and global ABS markets leave participants with little to discuss or remember from the previous year. Who would have imagined, still, that the student loan sector would produce one of the U.S. ABS market's most anticipated and talked-about structures for 2006? That is what happened with Nelnet SAFE extendible-note ABCP program. Elsewhere in the U.S., the CDO market, not resting from its vehement drive to greater profits and diversification, generated too many structures to chose just one, so ASR selected three: SURF, Everest I, and a nifty hybrid CDO from Merrill Lynch that required no triggers.

Call it safe, call it predictable, but don't dare call the Federal Family Education Loan Program (FFELP) ABS collateral type stodgy. While the student loan ABS sector pulled out all the stops for a year of issuance totaling $34 billion, the FFELP program gave the asset-backed commercial paper sector far and away the most notable deal in 2006 - that is, if the spectacle of ravenous investors beating down the issuer's door for the paper is any indication.

Energized by high demand and synthetic technology - from LCDS to CDO CDS to the ever-popular ABCDS - there was no shortage of notable deals within the U.S. CDO sector in 2006.

The one notable deal from China in 2006 was issued in the international market. Macquarie Wanda Real Estate Fund - a joint venture between Australia's Macquarie Group and Chinese property developer Dalian Wanda - in October sold the first offshore CMBS involving nine properties located in the People's Republic of China.

Russia's first mortgage backed security is remarkable for a number of reasons, but the most compelling is this: private housing in the country scarcely existed before the 90s. By historical standards, the country's move from private property to widespread home ownership to the birth of the mortgage has been more a breathless race than a gradual evolution. And last year, state-owned JSC Vneshtorgank (VTB) took the baton.

As the European securitization market matures so does its repertoire of deals. Gone are the days of extreme innovation. Instead, the market is increasingly defined by steadiness and dependability. This is demonstrated by the steadfast pricing spreads over the past year. But a lack of innovation did not mean a lackluster year - 2006 still had its share of shining stars that stood out in the record mix of deals, specifically in the CMBS market.

By November of last year, it appeared that Mexico would be a nonentity in the cross-border market for all of 2006. Domestic investors' unquenchable thirst for securitization was deterring originators from going abroad and the promise of the first cross-border RMBS was fading as originator Metrofinanciera delayed a deal over M&A matters.