ABS

Cohen & Co. last week opened a Los Angeles office for its middle market loan and CLO collateral management unit Emporia Capital Management. Cohen snagged David Ligon and Gary Kirshner from Union Bank of California, where they were group heads of the bank's equity sponsored lending team. The two join Cohen as managing directors.

UnumProvident Corp., a group and individual disability insurance provider, completed an insurance-linked ABS deal backed by premiums on long-term disability insurance policies. Proceeds from the transaction will finance a portion of the insurer's capital reserve requirements. The deal closed last Wednesday.

Trading on the ABS market was fairly light last week, as more than 3,000 market professionals prepared to head out to Orlando, Fla for Information Management Network's ABS East conference. By midweek, about $10 billion in deals were announced, and of that $3.8 billion had priced.

Working Capital Management Co., a fully supported asset-backed commercial paper conduit sponsored by Mizuho Corporate Bank, raised its purchase limit to $5 billion, from $3 billion. While it is not expected to substantially impact the ABCP sector, market sources familiar with the situation say that it represents the bank's more aggressive, albeit measured, commitment to acquiring for its securitization platform.

Wachovia Securities CDO analysts last month sought to find a new way to answer an old question: Is there a method to project future new-issue CDO performance using historical data? Their ultimate finding was yes, although with some caveats.

One year after bankruptcy reform legislation passed - changing the rules for who can file for bankruptcy and how it must be done - bankruptcy filings have stayed lower for longer than analysts expected. Filings are expected to average 12,000 to 13,000 per week for the rest of the year, making the full-year average 60% behind historical averages.

The Financial Accounting Standards Board (FASB) lifted a huge burden from MBS and ABS investors' shoulders last week by exempting those bonds from mark to market accounting requirements under FAS 155. Industry participants were concerned that FAS 155 contained accounting implications that would affect market liquidity and spreads for those securities.

Mortgage loans originated to U.S. borrowers this year and in late 2005 - marked by an environment of slowing home price appreciation and desperate mortgage brokers - are not performing as well as those loans originated in 2003 and 2004. In fact, subprime mortgage loans originated in the first quarter of this year were experiencing the level of foreclosures within six to seven months that loans originated in 2004 had at 13 months, Bear Stearns analysts Gyan Sinha and Mary Ann Thomas said last week.

Market sources expected new issuance to total slightly more than $15 billion last week, thanks in no small part to continued demand for HEL tranches that will feed into CDO transactions. By press time, about a third of expected issuance had hit the market and priced.

As the U.S. mortgage market continues its ugly decline, Countrywide Financial Corp. is looking to find profits in other lines of business - particularly those within capital markets. In a move that would further align it with the vertical integration strategy currently underway among Wall Street investment banks, the Calabasas, Calif.-based mega-lender may be looking to acquire an asset management business. This move is coupled with continuing to extend its U.S. Treasurys primary dealership to include derivatives and futures.

As the search for yield continues, both U.S. and European investors are seeking new kinds of exposure to CDO equity tranches. Zero-coupon equity and rated equity pieces in investment grade corporate synthetic transactions are on the rise in Europe, Derivative Fitch noted last week. The rating agency said it has received several inquiries from investors wishing to structure rated equity transactions.

Bank of America brought to the European market earlier this month the $546 million Pembridge Square Finance 2006-1, an interesting synthetic CDO referencing a $2.5 billion notional portfolio of both corporate obligations and ABS. KBC Financial Products is managing the deal, which was rated by Moody's Investors Service and Fitch Ratings.

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JP Morgan 10,765.7 1 16.1 22 Citigroup 10,626.5 2 15.9 17 Wachovia Corp 9,764.8 3 14.6 16 Barclays Capital 6,578.7 4 9.8 10 Deutsche Bank AG 5,934.7 5 8.9 14 Banc of America Securities LLC 4,438.3 6 6.6 8 Royal Bank of Scotland Group 3,644.0 7 5.4 8 Credit Suisse 3,466.3 8 5.2 7 HSBC Holdings PLC 2,389.3 9 3.6 3 Goldman Sachs & Co 2,326.6 10 3.5 4 Industry Total 66,929.3 - 100.0 74 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 & Co Inc 35,427.1 1 14.5 50 Citigroup 26,395.8 2 10.8 44 Deutsche Bank AG 23,615.1 3 9.7 34 Wachovia Corp 16,268.4 4 6.7 39 Banc of America Securities LLC 15,765.1 5 6.5 33 Credit Suisse 15,763.8 6 6.5 25 UBS 15,602.1 7 6.4 55 Bear Stearns & Co Inc 14,487.7 8 5.9 29 Morgan Stanley 13,111.5 9 5.4 55 Groupe Caisses d'Epargne 11,424.1 10 4.7 14 Industry Total 243,749.2 - 100.0 461 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 16,845.6 1 29.2 24 Citigroup 10,982.0 2 19.0 16 JP Morgan 9,674.7 3 16.8 21 Morgan Stanley 4,055.3 4 7.0 5 Deutsche Bank AG 3,674.9 5 6.4 11 Barclays Capital 3,373.8 6 5.9 8 Credit Suisse 2,285.0 7 4.0 10 HSBC Holdings PLC 1,999.9 8 3.5 2 Merrill Lynch & Co Inc 1,375.0 9 2.4 5 ABN AMRO 1,000.0 10 1.7 5 Industry Total 57,673.8 - 100.0 85 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 Deutsche Bank AG 1,750.0 1 18.8 3 Banc of America Securities LLC 1,554.5 2 16.7 3 Barclays Capital 1,409.5 3 15.1 2 ABN AMRO 1,250.0 4* 13.4 2 Lehman Brothers 1,250.0 4* 13.4 2 Royal Bank of Scotland Group 1,000.0 6 10.7 2 JP Morgan 500.0 7 5.4 1 Merrill Lynch & Co Inc 300.0 8* 3.2 1 Citigroup 300.0 8* 3.2 1 Industry Total 9,314.0 - 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 Lehman Brothers 51,449.3 1 11.0 112 Countrywide Securities Corp 49,152.7 2 10.5 83 Royal Bank of Scotland Group 40,900.6 3 8.7 96 Citigroup 31,710.7 4 6.8 78 Credit Suisse 31,639.0 5 6.7 80 Deutsche Bank AG 31,599.2 6 6.7 73 Morgan Stanley 30,248.8 7 6.4 32 Bear Stearns & Co Inc 27,773.8 8 5.9 84 Merrill Lynch & Co Inc 26,830.4 9 5.7 45 Goldman Sachs & Co 25,801.5 10 5.5 63 Industry Total 469,768.7 - 100.0 915 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 10,609.6 1 19.4 12 Deutsche Bank AG 7,642.2 2 14.0 11 Credit Suisse 5,627.8 3 10.3 9 Banc of America Securities LLC 4,720.6 4 8.7 6 Wachovia Corp 3,951.6 5 7.2 3 Lehman Brothers 3,873.7 6 7.1 3 Merrill Lynch & Co Inc 3,819.9 7 7.0 4 Goldman Sachs & Co 3,809.3 8 7.0 5 Morgan Stanley 3,328.1 9 6.1 5 RBC Capital Markets 2,179.0 10 4.0 4 Industry Total 54,565.2 - 100.0 39 Source: Thomson Financial

auto ABS 11% credit card ABS 8% enterprise finance 0% equipment ABS 2% real estate ABS 69% structured settlements 0% student loan ABS 8% trade receivables 1% utilities ABS 0%

Fitch Ratings last week packaged its global CDO and structured credit services into a stand-alone company called Derivative Fitch - a move that is expected to allow the agency's derivatives ratings much needed breathing room from the one-dimensional nature of traditional bond ratings. Derivative Fitch will eventually offer credit ratings on a differentiated scale from the agency's traditional ratings, along with market risk analytics aimed to help to lift the veil of opacity long associated with the market.