ABS

The U.S. ABS primary market priced over $18 billion last week as the auto and credit card sectors carried a palette of deals. The big stories of the week were General Motors Corp.'s announcement that it will cut 25,000 workers by 2008, and Federal Reserve Chairman Alan Greenspan's forecast for the U.S. economy.

ABS issuance in the credit card industry might see a slow-down in the short-term as consolidation gains traction with the recently announced acquisitions by Citigroup Inc. and Washington Mutual Inc. Over the long term, however, fewer players might give the sector a boost.

Despite CREMAC's recent sale of $180 million in high-yield bonds previously earmarked as collateral for the firm's first CDO offering, it intends to issue its three CDOs this year using different collateral, said Joseph Cafiero, president of the New York-based asset management firm.

Analysts with Moody's Investors Service said they are giving Ford Motor Co. and General Motors Corp. six months to prove themselves worthy of their current ratings. Speaking at Moody's' Auto Securitization Briefing last week, Bruce Clark, senior vice president in the financial institutions group, gave a run-down of areas Moody's will be watching over the next six months to decide whether to hold or drop the ratings of the two manufacturers.

Troubled lumber company Scotia Pacific Company LLC is working with UBS Securities to restructure $734 million of timber-collateralized notes. Scotia, a subsidiary of Houston-based MAXXAM Group Inc. is widely anticipated to miss its $27 million coupon payment due July 20, and in a June 9, Securities & Exchange Commission filing announced that its noteholders hired law firm Bingham McCutchen LLP as counsel and investment bank Houlihan Lokey Howard & Zukin as financial advisor.

Analysts at rating agency Fitch Ratings warned recently against relying solely on historical credit default or ratings data to decipher the level of risk involved in a particular CDO tranche. Instead, using market-based methodologies provides a more accurate picture of the amount of risk inherent in a prospective investment.

The market may begin to see increasingly more re-issued market value CDOs. That's because a significant amount of market value CDOs, which have performed relatively well, were launched in the late 1990s, so the first crop of such deals is reaching maturity now, according to Joo Hong, associate director at Fitch Ratings. Traditional market value CDOs typically have maturities of seven to eight years, while credit opportunity funds generally mature in five years, a CDO underwriter said.

Year to date as of 06/09 Term (days) 06/03 06/06 06/07 06/08 06/09 1-week

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Citigroup 5,480.7 1 14.6 10 Deutsche Bank AG 4,741.0 2 12.6 9 JP Morgan 4,289.5 3 11.4 7 Merrill Lynch & Co Inc 4,114.9 4 10.9 7 Credit Suisse First Boston 4,111.9 5 10.9 8 Barclays Capital 3,870.9 6 10.3 7 Banc of America Securities LLC 3,433.1 7 9.1 7 Wachovia Corp 3,362.5 8 8.9 7 Goldman Sachs & Co 1,841.0 9 4.9 2 Lehman Brothers 1,455.3 10 3.9 2 Industry Total 37,637.4 - 100.0 37 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 9,171.9 1 19.9 14 Citigroup 6,047.7 2 13.1 15 Morgan Stanley 3,984.6 3 8.7 16 UBS 3,442.6 4 7.5 8 Lehman Brothers 3,418.9 5 7.4 11 Bear Stearns & Co Inc 2,530.2 6 5.5 6 Goldman Sachs & Co 2,007.0 7 4.4 2 Groupe Caisses d'Epargne 1,742.0 8 3.8 2 Wachovia Corp 1,741.9 9 3.8 4 Deutsche Bank AG 1,652.1 10 3.6 6 Industry Total 46,088.3 - 100.0 120 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 4,974.9 1 35.1 11 Citigroup 2,874.8 2 20.3 6 Morgan Stanley 1,666.5 3 11.8 2 Barclays Capital 1,299.0 4 9.2 9 Deutsche Bank AG 959.8 5 6.8 8 Credit Suisse First Boston 738.2 6 5.2 4 Banc of America Securities LLC 586.2 7 4.1 5 Merrill Lynch & Co Inc 512.2 8 3.6 3 Lehman Brothers 375.0 9 2.7 1 Societe Generale 100.0 10 0.7 1 Industry Total 14,161.7 - 100.0 32 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 Morgan Stanley 1,191.7 1 18.9 2 Deutsche Bank AG 1,191.7 1 18.9 2 Banc of America Securities LLC 750.0 3 11.9 1 Lehman Brothers 725.8 4 11.5 1 JP Morgan 725.8 4 11.5 1 Barclays Capital 725.8 4 11.5 1 HSBC Holdings PLC 566.7 7 9.0 1 Citigroup 212.0 8 3.4 1 Industry Total 6,319.5 - 100.0 6 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 Bear Stearns & Co Inc 30,885.0 1 10.9 52 Lehman Brothers 27,484.5 2 9.7 64 Morgan Stanley 25,391.9 3 9.0 33 Deutsche Bank AG 24,584.7 4 8.7 41 Royal Bank of Scotland Group 24,523.9 5 8.7 40 Credit Suisse First Boston 22,398.4 6 7.9 49 Countrywide Securities Corp 20,852.0 7 7.4 28 Merrill Lynch & Co Inc 16,747.6 8 5.9 22 Banc of America Securities LLC 15,244.6 9 5.4 30 Citigroup 14,342.8 10 5.1 30 Industry Total 283,113.0 - 100.0 483 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 3,134.2 1 14.6 4 Citigroup 2,982.6 2 13.9 6 Deutsche Bank AG 2,976.7 3 13.9 5 Morgan Stanley 2,757.6 4 12.9 3 Credit Suisse First Boston 2,696.1 5 12.6 4 Merrill Lynch & Co Inc 1,839.8 6 8.6 2 UBS 1,827.7 7 8.5 4 JP Morgan 1,187.2 8 5.5 3 Lehman Brothers 1,012.4 9 4.7 1 Goldman Sachs & Co 1,009.5 10 4.7 3 Industry Total 21,423.6 - 100.0 18 Source: Thomson Financial

auto ABS 17% credit card ABS 6% global MBS 5% real estate ABS 55% student loan ABS 7% other 10%

JPMorgan Securities this month concluded its first loan-level analysis of New Century Financial Corp.'s servicing portfolio since the subprime mortgage lender began using a new servicing platform in late 2002. New Century, the nation's largest REIT and second-largest subprime lender, originated $42 billion of loans last year and expects volume to reach at least $45 billion this year.

Subprime mortgage REITs Aames Investment Corp., ECC Capital Corp. and NovaStar Financial Inc. each offered more than $1 billion apiece of ABS recently, as well as a myriad of other news.

A variety of challenges face the ABS market both long and short term and in response to concerns, the American Securitization Forum is hosting its annual meeting this month, with a focus on communicating relevant topics to a broad market audience.

The U.S. ABS primary market priced a healthy $7 billion in an abbreviated week that also witnessed whispers of a slow-down in the Federal Reserve's "measured pace" of rate hikes. Dallas Fed President Richard Fisher reportedly said the Fed is in the eighth inning of a nine-inning tightening cycle, and gave the impression the Fed may consider halting the increases after its next meeting.

The CIT Group priced $1 billion of FFELP-guaranteed student loan-backed notes last week, in a five-tranche deal led by Citigroup Global Markets and Credit Suisse First Boston, its first transaction in the sector.