ABS

The International Swaps and Derivatives Association last week unveiled a protocol that will allow cash settlement across a broad spectrum of credit derivative products - including single name index tranches and plain vanilla credit derivatives. The protocol is essentially the same as those used for half-a-dozen credit events since the May 2005 bankruptcy of automotive supplier Collins & Aikman Corp. to settle covered index trades.

Commercial loan provider CapitalSource has priced its most flexible ABS transaction to date, a $1.5 billion revolving cash flow CLO.

Maxim Group is preparing to bring its first CDO to the market following the departure several months ago of its CDO group head Wing Chau. Maxim shelved its CDO group, Maxim Advisory, after Chau and several key staff members left. Now, under the name Maxim Capital Management, and with former Bear Stearns managing director Doug Jones at its head as president and chief investment officer, the team is preparing to emerge again as a regular CDO manager.

Far from going quietly into the night, the third quarter of the ABS market came to a close with a final week that saw slightly wider HEL spreads and the absence of Fitch Ratings from a stream of home equity loan ABS deals.

Driven by investor demand and the availability of new structures, commercial real estate CDO issuance has reached nearly $30 billion so far this year, compared to only $14.5 billion in 2005 and $6.4 billion in 2004. While the sector has continued to perform well, Fitch Ratings last week warned that the pace of upgrades it has been enjoying is not likely to continue.

Still on a roll in the world of CLO issuance, private equity firm The Carlyle Group announced the close of its ninth U.S. high yield fund last week Carlyle High Yield Partners IX (CHYP IX).

Perils associated with natural disasters have become more intense since 1997. Just as the insurance-linked securities sector has adjusted to these changes by developing new structures to absorb risks associated with such events as winter/ice storms, floods and tornadoes, Moody's Investors Service recently unveiled its expanded approach to rating the bonds.

CLO and leveraged loan spreads are expected to remain at or near tights as credit fundamentals in the corporate sector remain robust against a backdrop of deterioration within the U.S. housing market, Bear Stearns analysts wrote last week.

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JP Morgan 10,300.2 1 17.0 20 Citigroup 8,956.9 2 14.8 14 Wachovia Corp 6,815.8 3 11.2 13 Barclays Capital 6,739.9 4 11.1 11 Deutsche Bank AG 5,395.6 5 8.9 12 Banc of America Securities LLC 4,248.3 6 7.0 8 Royal Bank of Scotland Group 4,019.0 7 6.6 8 Credit Suisse 3,466.3 8 5.7 7 HSBC Holdings PLC 2,389.3 9 3.9 3 Merrill Lynch & Co Inc 1,847.5 10 3.0 4 Industry Total 60,676.6 - 100.0 68 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 29,596.9 1 13.7 43 Citigroup 24,322.6 2 11.3 41 Deutsche Bank AG 21,033.2 3 9.7 28 Wachovia Corp 14,789.8 4 6.8 36 Banc of America Securities LLC 14,124.0 5 6.5 30 Credit Suisse 13,572.0 6 6.3 21 Bear Stearns & Co Inc 12,863.1 7 6.0 25 Groupe Caisses d'Epargne 11,424.1 8 5.3 14 Morgan Stanley 11,341.8 9 5.3 38 UBS 10,786.1 10 5.0 46 Industry Total 215,988.7 - 100.0 399 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 15,645.6 1 29.4 22 Citigroup 9,982.0 2 18.8 15 JP Morgan 9,674.7 3 18.2 21 Morgan Stanley 3,529.0 4 6.6 4 Deutsche Bank AG 3,424.9 5 6.4 10 Barclays Capital 3,096.8 6 5.8 7 Credit Suisse 2,285.0 7 4.3 10 HSBC Holdings PLC 1,999.9 8 3.8 2 ABN AMRO 1,000.0 9* 1.9 5 Merrill Lynch & Co Inc 1,000.0 9* 1.9 4 Industry Total 53,197.4 - 100.0 78 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 21.3 3 ABN AMRO 1,250.0 2* 15.2 2 Lehman Brothers 1,250.0 2* 15.2 2 Royal Bank of Scotland Group 1,000.0 4* 12.2 2 Banc of America Securities LLC 1,000.0 4* 12.2 2 Barclays Capital 855.0 6 10.4 1 JP Morgan 500.0 7 6.1 1 Merrill Lynch & Co Inc 300.0 8* 3.7 1 Citigroup 300.0 8* 3.7 1 Industry Total 8,205.0 - 100.0 7 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 49,117.1 1 11.1 107 Countrywide Securities Corp 45,296.4 2 10.2 65 Royal Bank of Scotland Group 37,358.2 3 8.4 85 Morgan Stanley 31,112.0 4 7.0 31 Credit Suisse 30,968.9 5 7.0 79 Deutsche Bank AG 30,263.5 6 6.8 67 Citigroup 27,846.0 7 6.3 65 Bear Stearns & Co Inc 27,321.3 8 6.2 77 Merrill Lynch & Co Inc 24,333.6 9 5.5 42 JP Morgan 23,936.4 10 5.4 55 Industry Total 443,383.8 - 100.0 818 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 20.4 12 Deutsche Bank AG 7,642.2 2 14.7 11 Credit Suisse 5,627.8 3 10.8 9 Lehman Brothers 3,873.7 4 7.5 3 Merrill Lynch & Co Inc 3,819.9 5 7.4 4 Goldman Sachs & Co 3,809.3 6 7.3 5 Banc of America Securities LLC 3,418.5 7 6.6 5 Morgan Stanley 3,328.1 8 6.4 5 Wachovia Corp 2,649.5 9 5.1 2 RBC Capital Markets 1,500.0 10 2.9 2 Industry Total 51,961.0 - 100.0 38 Source: Thomson Financial

auto ABS 10% credit card ABS 8% enterprise finance 0% equipment ABS 2% real estate ABS 70% structured settlements 0% student loan ABS 8% trade receivables 1% utilities ABS 0%

LAS VEGAS - From subprime lenders to home equity ABS investors, attendees at the Information Management Network's Subprime ABS conference held here last week found themselves predicting - in the midst of a changing U.S. housing market landscape - how the sector will make it through a downturn.

Dutch financial institution ING Bank has prepared an asset-backed commercial paper conduit called Simba Funding Corp., which will provide credit default protection on the bank's assets. The unusual structure, not seen on the ABCP market for almost four years, appears to be a show of confidence that the country's banking regulatory policies will welcome synthetic ABCP structures under Basel II.

In a first for the aircraft ABS sector and for GE Commercial Aviation Services, Blade Engine Securitization recently completed a $362 million debt and equity transaction that combines elements of a securitization and a private placement transaction. Dealmakers say it promises to draw imitators from within the sector and the ABS business overall.

Fueled by active issuance from the consumer sector, and despite a slow early start, the ABS market raced toward a week of $20 billion in primary issuance.

Moody's Investors Service this week will release a report suggesting home equity ABS deals incorporate more effective triggers. Analysts at the rating agency last week stressed they were not aiming to "dictate" the type of triggers used in home equity deals, but did say lower-rated tranches would likely receive a more favorable rating through the use of one of two alternative triggers it outlines in its report, in addition to standard cumulative loss and delinquency triggers.