ABS

Student loan provider Sallie Mae announced last week that it is looking to the wholesale consolidation loan business for its next growth channel.

Lehman Brothers last week closed its second reverse mortgage transaction since 2002. Contrasting from its 2005 issue, the $598 million SASCO 2006RM1, incorporates a $25 million single-A tranche. At least five more deals are expected in the market from various issuers prior to yearend.

At the American Securitization Forum (ASF) Sunset Seminar on rating agency reform last Tuesday held at its headquarters, panelists urged ABS market professionals to bring their opinions on the issue before the Securities and Exchange Commission. It's a race against time before the SEC and Congress begin to enact rules on credit rating agency reform, at the Federal government's behest, that could significantly impact the ABS industry in general.

LAS VEGAS - Subprime lenders are beginning to report marked increases in the number of borrowers either failing to make their first mortgage payment or falling behind shortly afterward - a trend some say is the result of overly aggressive mortgage brokers misrepresenting borrower income or home values.

Since its inception more than a year and a half ago, brokerage firm Pali Capital's CDO structuring business has provided new options for middle market insurance companies, smaller banks and wealth management firms that focus on alternative investments. Pali has done this by developing CLO vehicles and credit default swap (CDS) CDOs that better fit the needs of middle market clients. These investors, not often coveted by larger banks, tend to have shorter duration and lower risk expectations.

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JP Morgan 9,288.5 1 16.5 18 Citigroup 8,456.9 2 15.0 13 Wachovia Corp 6,422.4 3 11.4 12 Barclays Capital 6,232.3 4 11.0 10 Deutsche Bank AG 5,413.9 5 9.6 12 Banc of America Securities LLC 3,740.6 6 6.6 7 Royal Bank of Scotland Group 3,644.0 7 6.5 7 Credit Suisse 3,466.3 8 6.1 7 HSBC Holdings PLC 2,389.3 9 4.2 3 Merrill Lynch & Co Inc 1,847.5 10 3.3 4 Industry Total 56,402.2 - 100.0 63 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 23,876.8 1 11.9 38 Citigroup 23,630.7 2 11.8 40 Deutsche Bank AG 18,933.0 3 9.4 27 Credit Suisse 13,572.0 4 6.8 21 Bear Stearns & Co Inc 12,863.1 5 6.4 25 Wachovia Corp 12,578.7 6 6.3 31 Banc of America Securities LLC 12,209.6 7 6.1 28 Morgan Stanley 11,341.8 8 5.6 38 UBS 10,006.1 9 5.0 43 JP Morgan 9,647.6 10 4.8 25 Industry Total 200,847.1 - 100.0 377 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 14,428.3 1 28.6 19 Citigroup 9,982.0 2 19.8 15 JP Morgan 8,924.7 3 17.7 20 Morgan Stanley 3,529.0 4 7.0 4 Deutsche Bank AG 3,424.9 5 6.8 10 Barclays Capital 3,096.8 6 6.1 7 HSBC Holdings PLC 1,999.9 7 4.0 2 Credit Suisse 1,800.0 8 3.6 9 ABN AMRO 1,000.0 9* 2.0 5 Merrill Lynch & Co Inc 1,000.0 9* 2.0 4 Industry Total 50,537.4 - 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 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 44,451.1 1 11.0 98 Countrywide Securities Corp 35,223.3 2 8.7 54 Royal Bank of Scotland Group 34,777.1 3 8.6 80 Morgan Stanley 29,712.1 4 7.4 30 Credit Suisse 28,418.0 5 7.0 76 Deutsche Bank AG 27,807.1 6 6.9 60 Bear Stearns & Co Inc 25,617.4 7 6.4 74 Citigroup 23,271.4 8 5.8 61 JP Morgan 23,016.2 9 5.7 52 Merrill Lynch & Co Inc 21,276.7 10 5.3 37 Industry Total 403,349.8 - 100.0 764 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 7,390.8 1 15.6 10 Deutsche Bank AG 7,242.4 2 15.2 10 Credit Suisse 5,627.8 3 11.8 9 Lehman Brothers 3,873.7 4 8.2 3 Goldman Sachs & Co 3,809.3 5 8.0 5 Merrill Lynch & Co Inc 3,420.1 6 7.2 3 Banc of America Securities LLC 3,418.5 7 7.2 5 Morgan Stanley 2,928.3 8 6.2 4 Wachovia Corp 2,649.5 9 5.6 2 RBC Capital Markets 1,500.0 10 3.2 2 Industry Total 47,542.8 - 100.0 35 Source: Thomson Financial

auto ABS 10% credit card ABS 9% enterprise finance 0% equipment ABS 2% real estate ABS 69% structured settlements 0% student loan ABS 9% trade receivables 1% utilities ABS 0%

The torrid pace of deals churning from the industry coined "CDO machine" this year is making last year's record issuance look like a warm-up round. Total dollar volume in the U.S. CDO market was up 96% in the first eight months of this year compared to the same period last year, according to Deutsche Bank. The number blew past the broader ABS market's feeble 0.05% gain over 2005 issuance at this time last year.

The Louisiana Public Service Commission (LPSC) last week appointed a roster of financial advisors, energy consultants and legal counsel to structure a deal that would allow Entergy Corp. to raise $690 million in securitization debt. The New Orleans-based electrical power company is looking to recoup costs it incurred after Hurricanes Katrina and Rita. If given final approval, Entergy could come to market with the transaction in early 2007.

Investors from all corners of the ABS market, especially those from Europe, came out in full force last week. With such demand for ABS paper, market players expected the week's deal tally to reach $20 billion.

Standard and Poor's late last week said it will begin assigning so-called "swap risk ratings" upon request to all rated credit default swaps - primarily those in the global synthetic CDO sector. The move highlights both efforts toward transparency within the credit default swap market, along with a shift to include the structural nuances of unfunded credit default swap transactions within the definition of ratings.

Citibank held onto its spot as the largest ABCP program administrator, with $83.9 billion in paper issued from its 13 programs at the end of the first quarter, according to Moody's Investors Service, which published its mid-year review of the ABCP market in late August. On the issuance side, European appetite for short-term funding, a higher utilization rate and market infatuation with repurchase agreements helped boost ABCP outstandings to a hearty $920 billion by the end of June.

In a move designed to "reflect the expanding capabilities of its entire organization," Cohen Brothers & Co. last week announced it had changed its named to Cohen & Co.

Hoping to align its asset-backed commercial paper programs for anticipated growth in the global market for asset-backed commercial paper, JPMorgan Chase is making several changes to its conduit programs.

Net loss rates on securitized prime and subprime auto loans improved dramatically during the second quarter of 2006, thanks to steadily falling unemployment rates and rising values on used cars, according to Moody's Investors Service.