ABS

Despite Personal bankruptcy filings having climbed to record numbers for the second month in a row with 170,130 filings in April, credit card chargeoffs seem to be holding stable, according to a report from Fitch Ratings. April's numbers represent a 3% increase over March 2005 and are seen as the continued fallout of the April 20, enactment of the Bankruptcy Reform Act.

Michael Youngblood, head of ABS research at Friedman Billings Ramsey, said last week that investors should be more concerned about the general prospect of payment shock to be experienced by all adjustable rate subprime borrowers - either with a hybrid ARM or an interest-only ARM - than with those loans' form of amortization. Youngblood said the general characteristics of IO ARMs and hybrid ARMs are nearly indistinguishable, and where there are material differences - such as the borrower's credit score - the IO loans actually come out looking better, contrary to the skeptical views of the subprime IO loan by many market participants.

ABN AMRO plans to raise the bar for Australia's so-called socially responsible fixed interest rate investment vehicles with its newest CDO issuance set for Friday.

As if the high-yield bond market hasn't treated private equity firms well enough already, some financial sponsors are now pushing for more flexibility in the covenants - or the restrictions around a company's capital structure - that govern their high-yield borrowings.

Year to date as of 06/02 Term (days) 05/27 05/30 05/31 06/01 06/02 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 5,135.9 1 13.4 9 Deutsche Bank AG 4,741.0 2 12.4 9 JP Morgan 4,289.5 3 11.2 7 Merrill Lynch & Co Inc 4,114.9 4 10.7 7 Barclays Capital 3,870.9 5 10.1 7 Credit Suisse First Boston 3,449.5 6 9.0 7 Banc of America Securities LLC 3,433.1 7 9.0 7 Wachovia Corp 3,362.5 8 8.8 7 Goldman Sachs & Co 1,841.0 9 4.8 2 Lehman Brothers 1,455.3 10 3.8 2 Industry Total 38,365.5 - 100.0 36 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 8,615.4 1 19.6 13 Citigroup 6,047.7 2 13.7 15 Morgan Stanley 3,984.6 3 9.1 16 UBS 3,442.6 4 7.8 8 Lehman Brothers 3,418.9 5 7.8 11 Bear Stearns & Co Inc 2,530.2 6 5.8 6 Goldman Sachs & Co 2,007.0 7 4.6 2 Groupe Caisses d'Epargne 1,742.0 8 4.0 2 Credit Suisse First Boston 1,589.0 9 3.6 4 Banc of America Securities LLC 1,488.1 10 3.4 11 Industry Total 44,006.8 - 100.0 116 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 38.1 11 Citigroup 2,874.8 2 22.0 6 Morgan Stanley 1,666.5 3 12.8 2 Barclays Capital 1,049.1 4 8.0 8 Deutsche Bank AG 959.8 5 7.4 8 Credit Suisse First Boston 488.3 6 3.7 3 Lehman Brothers 375.0 7 2.9 1 Banc of America Securities LLC 286.6 8 2.2 4 Merrill Lynch & Co Inc 212.6 9 1.6 2 Societe Generale 100.0 10 0.8 1 Industry Total 13,062.4 - 100.0 30 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 29,672.2 1 11.7 46 Morgan Stanley 23,594.0 2 9.3 28 Credit Suisse First Boston 22,016.2 3 8.7 49 Lehman Brothers 21,955.5 4 8.7 55 Royal Bank of Scotland Group 21,708.4 5 8.6 35 Deutsche Bank AG 18,943.3 6 7.5 37 Countrywide Securities Corp 18,809.5 7 7.4 24 Merrill Lynch & Co Inc 14,931.1 8 5.9 19 Banc of America Securities LLC 13,312.6 9 5.2 30 Citigroup 12,009.1 10 4.7 27 Industry Total 253,952.0 - 100.0 444 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 15.4 4 Deutsche Bank AG 2,976.7 2 14.6 5 Morgan Stanley 2,757.6 3 13.5 3 Citigroup 2,482.7 4 12.2 5 Credit Suisse First Boston 2,196.2 5 10.8 3 Merrill Lynch & Co Inc 1,839.8 6 9.0 2 UBS 1,827.7 7 9.0 4 JP Morgan 1,187.2 8 5.8 3 Lehman Brothers 1,012.4 9 5.0 1 Goldman Sachs & Co 1,009.5 10 4.9 3 Industry Total 20,423.8 - 100.0 17 Source: Thomson Financial

auto ABS 18% credit card ABS 5% global MBS 5% real estate ABS 61% student loan ABS 8% other 3%

NEW YORK - Although an occasional annoyance to investors, extendible ABCP is the inescapable future of the conduit market, according to panelists speaking at last week's American Securitization Forum Sunset Seminar dedicated to the topic (see Observation p 18-19). Recent technological advances offering significant economic benefits to issuers are seen spreading to new sectors, regardless of whether investors feel they are adequately compensated for a risk they consider too great for the reward.

Anumber of CDO investors right now are like penny-pinching shoppers waiting for after-Christmas bargains, according to one analyst. The problem though, is that Christmas Day - the date the real estate bubble may be pricked - is a moving target.

Allegheny Energy, Inc., a Greensburg, Pa.-based utility company, filed with the West Virginia Public Service Commission last week for a financing order to issue two 15-year environmental control bonds totaling $381 million. The bonds requested, at sizes of $214 million and $167 million each, will be used to finance improvements to a power plant in Fort Martin, W.Va., according to Allegheny spokesman Allen Staggers. The bonds represent a new breed of stranded cost, or rate reduction bonds.

Accredited Home Lenders closed its recently created $1 billion Carmel Mountain Funding Trust extendable asset-backed commercial paper conduit last week and plans to quickly tap its full capacity, said Charlie Ryan, securitization coordinator at Accredited.

Stamford, Conn.-based money manager Aladdin Capital Management plans to enter the CDO market in full force as it prepares its first two ABS CDOs in the coming months. Aladdin recently added three individuals to its newly built asset-backed and commercial mortgage-backed securities team as part of its effort to expand its game into the ABS and CMBS playing field.

By Nathan Abegg, senior manager at Deloitte & Touche LLP

CMBS-backed CDO issuance could exceed $15 billion this year, up from $8 billion in 2004, according to Moody's Investors Service. While deal sizes historically have been small relative to collateralized mortgage-backed securities, at $300 million to $500 million, larger deals - exceeding $1 billion - are in the pipeline, according to Tad Philipp, a managing director at Moody's.

The U.S. ABS primary market heated up last week with $23 billion in new issues priced. Amid the sea of home equity deals to hit the market were four auto deals, including one from Harley-Davidson Motor Co., one student loan deal and one credit card deal.